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Renewing ITINs - Did You Know?
Individual Taxpayer Identification Numbers are used for taxpayers who are required for U.S. tax purposes to have a U.S. taxpayer identification number but do not qualify to get a social security number.
If you use an ITIN, you should check if it expires this year. If it does, information about how to renew your ITIN can be found at: https://www.irs.gov/credits-deductions/individuals/how-do-i-renew-my-itin. Keeping your ITIN current helps avoid tax refund and processing delays.
Taxpayers who have not used their ITIN to file a federal return at least once in the last three years will see their number expire Dec. 31, 2017. ITINs with middle digits 70, 71, 72 or 80 will also expire at the end of the year.
Work Clothes and Uniforms - Did You Know?
You may be able to deduct the cost and upkeep of work clothes if they're required as a condition of your employment, and if the clothes aren't suitable for everyday wear.
Examples of jobs that may be able to deduct the cost and upkeep of work clothing are delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers. Musicians and entertainers may also be able to deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.
Protective clothing such as safety shoes or boots, safety glasses, hard hats and work gloves may also be able to be deducted.
Retirement Contributions - Did You Know?
If you participate through your work in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan, the contribution limit for 2018 has increased from $18,000 to $18,500.
The limit on annual contributions to an IRA remains unchanged from 2017, at $5,500.
Teachers and Educators - Did You Know?
Eligible educators and teachers may be able to deduct up to $250 for qualified expenses. An eligible educator can be a kindergarten through Grade 12 teacher, instructor, counselor, principal or aide that has worked for at least 900 hours in a school as determined under state law.
Qualified expenses can be fees for professional development courses, books, supplies, computer equipment (including related software and services), other equipment and supplementary materials used in the classroom.
Reconstructing Records after a Disaster
In the event of a disaster, you might need to reconstruct records to prove their loss. Doing this may be essential for tax purposes, getting federal assistance, or insurance reimbursement.
Here are 12 things you can do to help reconstruct your records after a disaster:
- You can get free tax return transcripts by using the Get Transcript tool on IRS.gov. You can also call 800-908-9946 to order them by phone.
- To establish the extent of the damage, you should take photographs or videos as soon after the disaster as possible.
- You can contact the title company, escrow company, or bank that handled the purchase of your home to get copies of appropriate documents.
- If you are a homeowner, you should review your insurance policy as the policy usually lists the value of a building to establish a base figure for replacement.
- If you've made improvements to your home, you should contact the contractors who did the work to see if records are available. If possible, you should also get statements from the contractors to verify the work and cost. You can also get written accounts from friends and relatives who saw the house before and after any improvements.
- For inherited property, you can check court records for probate values. If a trust or estate existed, you can contact the attorney who handled the trust.
- When no other records are available, you can check the county assessor's office for old records that might address the value of the property.
- There are several resources that can help you determine the current fair-market value of most cars on the road. These resources are all available online and at most libraries: Kelley's Blue Book, National Automobile Dealers Association, and Edmunds.
- You can look on your mobile phone for pictures that show the damaged property before the disaster.
- You can support the valuation of property with photographs, videos, canceled checks, receipts, or other evidence.
- If you bought items using a credit card or debit card, you should contact your credit card company or bank for past statements.
- If you don't have photographs or videos of your property, a simple method to help you remember what items you lost is to sketch pictures of each room that was impacted.
Job Search Expenses - Did You Know?
If you're currently looking for a new job in your current occupation, you may be able to deduct some related expenses even if you don't get a new job.
The below expenses may be tax-deductible:
- Costs of preparing and mailing your Resume
- Travel expenses including transportation, meals, and lodging
- Placement or employment agency fees
However, you would not be able to claim these expenses if you are looking for a job outside your current occupation, looking for a job for the first time, or had substantial time pass between your last job and the new one.
These must be itemized deductions and conditions such as a minimum threshold may apply.
Six Month Filing Extension Reminder.
If you requested an extra six months in April to file your 2016 tax return, the deadline to file is coming up on Monday, October 16th.
If you live or work in an area affected by a disaster, you may have more time to file. Additional information can be found here: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations.
Charity Vehicle Donations - Did You Know?
Differing amounts can be deducted from a charity vehicle donation depending on the circumstances listed below.
If the organization sells the vehicle without using it significantly for charitable purposes or making material improvements, then your deduction is limited to the proceeds from the sale.
If the vehicle is transferred to a needy individual by the charity organization for less than fair market value, you may deduct the Fair Market Value even if it exceeds the sales proceeds.
If the vehicle is used significantly or materially improved by the charity organization, you may be able to deduct the fair market value as of the donation date.
Please note that if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to figure out the deductible amount. Other rules and exceptions may apply.
Hurricane Tax Relief - Did You Know?
The IRS has announced tax relief for people affected by Hurricanes Irma and Harvey.
For Hurricane Irma, affected individuals and businesses will have until Jan. 31, 2018, to file returns and pay any taxes that were originally due during this period.
More information on deadlines and covered areas can be found at: https://www.irs.gov/newsroom/irs-expands-tax-relief-to-victims-of-hurricane-irma-in-florida-extension-filers-have-until-jan-31-to-file.
For Hurricane Harvey, certain deadlines falling on or after Aug. 23, 2017 and before Jan. 31, 2018 are granted additional time to file through Jan. 31, 2018.
More information on deadlines and covered areas can be found at: https://www.irs.gov/newsroom/tax-relief-for-victims-of-hurricane-harvey-in-texas.
Equifax Data Breach - Security Measures
You may have heard of the data breach at Equifax that exposed the sensitive personal data of 143 million Americans. According to Equifax, the breach lasted from mid-May through July.
As a precaution, the Federal Trade Commission recommends several steps below that you can take to help protect your data and help mitigate any identity theft issues:
- Check your credit report for free by visiting http://annualcreditreport.com and note any unauthorized or unrecognized activity that may indicate identity theft.
- Consider placing a credit freeze on your files that make it harder for someone new to open an account in your name. This will not prevent a thief from making changes to existing accounts in your name.
- Monitor your existing credit card and bank accounts closely for charges you don't recognize.
- If you decide not to do a credit freeze, you can consider placing a fraud alert on your files. The alert warns creditors that you may be a victim of identity theft and they should verify that anyone looking for credit in your name is really you.
- File your taxes early. File as soon as you have the tax information needed before a potential scammer can.
More information and steps can be found at: https://www.identitytheft.gov/Info-Lost-or-Stolen.
Fake Charity Scams - Did You Know?
In the light of the ongoing events of Hurricane Harvey, the IRS has issued a warning about possible fake charity scams.
While there has been an outpouring of support across the country, you should be aware of criminals that take advantage of this by impersonating charities to get money or private information.
You can avoid potential charity scam artists by following the tips below:
- Be wary of charities with names that are similar to familiar or nationally known organizations. The IRS has a tool here for checking exempt organizations: https://www.irs.gov/charities-non-profits/search-for-charities.
- Don't give out personal financial information like Social Security Numbers, or credit card and bank account numbers and passwords to anyone who solicits a donation.
- Avoid giving or sending cash. For security and tax record purposes, the IRS recommends contributing by check or credit card or another way that provides documentation of the donations.
- IRS publication 526, Charitable Contributions, available on IRS.gov, lists the tax rules that apply to making legitimate tax-deductible donations. It also provides details on what records to keep.
Taxpayer Bill of Rights - Did You Know?
As a taxpayer, you have a set of ten fundamental rights that the IRS is obligated to protect.
1. The Right to be Informed.
2. The Right to Quality Service.
3. The Right to Pay No More Than the Correct Amount of Tax.
4. The Right to Challenge the IRS's Position and Be Heard.
5. The Right to Appeal an IRS Decision in an Independent Forum.
6. The Right to Finality.
7. The Right to Privacy.
8. The Right to Confidentiality.
9. The Right to Retain Representation.
10. The Right to a Fair and Just Tax System.
More information can be found in IRS Publication 1: Your Rights as a Taxpayer, available here: https://www.irs.gov/pub/irs-pdf/p1.pdf.
Scammers and IRS Impersonation - Did You Know?
The IRS has issued another alert that scammers are continuing to contact taxpayers. Among the most common are phone calls and fake emails. Thieves use the IRS name, logo or a fake website to try and steal money from taxpayers.
Any first contact from the IRS will usually come in the mail.
Please note that the IRS will never:
- Call to demand immediate payment using specific payment method such as a prepaid debit card, gift card or wire transfer
- Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying
- Demand payment of taxes without giving you the opportunity to question or appeal the amount owed
- Ask for credit or debit card numbers over the phone
For information on how to report scams or phishing attempts, visit http://IRS.gov/phishing.
Selling Your Home - Did You Know?
If you're selling your home, you may qualify to exclude all or part of any gain from the sale of your main home from your income.
In order to claim the exclusion, for the last five years, you need to have owned the home for at least two years, and lived in it as your main home for at least two years.
If there is a gain from the sale, you may be able to exclude up to $250,000 of the gain or $500,000 on a joint return in most cases. However, if a main home sells for less than its original purchase price, there are no gains to deduct.
Please note that exceptions may apply for certain cases, please check with us if you have any questions.
Gambling Income - Did You Know?
All income from gambling must be reported to the IRS and are taxable. However, if you are eligible to itemize your deductions, you may be able to deduct your losses up to the amount of your winnings.
This can include winnings and losses from: lotteries, raffles, horse and dog races, casino games, poker games, and sports betting.
The IRS recommends keeping a gambling diary as well as receipts tracking:
- The date and type
- Name and address of the places
- Amount won and lost
Tracking Tips - Did You know?
For those that work in summer or other jobs that include tipping, the IRS recommends keeping a tips diary so that tips can be accurately reported on your tax return, to your employer, and as proof of tip income.
The IRS provides a Form 4070A (https://www.irs.gov/pub/irs-prior/f4070a--2005.pdf) that can be used as a tip diary, or you can use a notebook to note down for the record:
- Cash tips you get directly from customers or from other employees.
- Tips from credit and debit card charge customers that your employer pays you.
- The value of any noncash tips you get, such as tickets, passes, or other items of value.
- The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips.
Is Alimony Deductible?
Alimony is a series of payments made to a former spouse after a divorce. It is taxable to the recipient and deductible for the payer. For a payment to be considered alimony:
- It must be paid in cash
- It must be paid pursuant to a written divorce or separation agreement
- It cannot be designated as other than alimony (i.e., child support)
- It must terminate upon the death of the recipient
- It cannot be paid to a member of the same household
- It cannot be paid to a spouse with whom the taxpayer is filing a joint return
Summer Jobs - Did You Know?
If you're starting a summer job or know a teen or student who is, here is a useful tax-saving tip:
Students and teenage employees normally have taxes withheld from their paychecks by their employer after filling out a Form W-4.
However, if the job is regarded as self-employment, like baby-sitting or lawn care can be, they should keep good records of all expenses to help maximize potential deductions.
In the case of lawn care, potential deductible expenses include: business cards, fliers, fuel, equipment rentals, chemicals, work mileage, etc.
Child/Dependent Care Credit - Did You Know?
If you send your children to a summer day camp while you work or look for work, save your paperwork as you may be eligible for the IRS Child and Dependent Tax Credit. You may also qualify if you paid for someone to care for a child, dependent or spouse during the year.
The qualifying person can be a child under the age of 13 or a spouse or dependent who lived with the taxpayer for more than half the year, and is physically or mentally not capable of caring for themselves.
Sharing Economy Income - Did You Know?
The IRS regards income from online platforms such as those that allow you to rent out a bedroom or offer car rides, as taxable. The taxes apply even if it's only part time or a sideline business, if payments are in cash or if an information return like a Form 1099 or Form W2 is issued.
Installment Payments - Did You Know?
Installment agreements are available for taxpayers that are not able to pay the due tax immediately. You may apply for an installation agreement with the Online Payment Agreement tool on the IRS website or speak to your tax professional.
In order to be eligible for installment agreements, you must be:
- An individual that owes $50,000 or less in combined tax, penalties and interest and have filed all required returns
- A business that owes $25,000 or less in combined tax, penalties and interest for the current year or last year's liabilities and have filed all required returns
Moving with Pets - Did You Know?
If you moved for work during the tax year (and meet IRS requirements), you may be able to claim deductions on any special expenses needed to move your household pets to your new home.
Hobby or Business? - Did You Know?
Last week we shared a tip regarding claiming hobby deductions. Businesses have significantly more opportunities to claim deductions, but how do you know if you have a hobby or a business in the eyes of the IRS?
There are generally nine factors the IRS considers that establishes an activity as a business instead of a hobby:
- Whether you carry on the activity in a businesslike manner.
- Whether the time and effort you put into the activity indicate you intend to make it profitable.
- Whether you depend on income from the activity for your livelihood.
- Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
- Whether you change your methods of operation in an attempt to improve profitability.
- Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
- Whether you were successful in making a profit in similar activities in the past.
- Whether the activity makes a profit in some years and how much profit it makes.
- Whether you can expect to make a future profit from the appreciation of the assets used in the activity.
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It's That Time of Year! I just wanted to have another way for people to reach out to me and ask questions or get help with Tax and Financial concerns.