Check Out College Tax Credits for 2014 and Years Ahead

With another school year now in full swing, the Internal Revenue Service recently reminded parents and students that now is a good time to see if they will qualify for either of two college tax credits or any of several other education-related tax benefits when they file their 2014 federal income tax returns.

Back-to-School Reminder for Parents and Students: Check Out College Tax Credits for 2014 and Years Ahead

For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-6188 Address: 123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz

Time to Start Organizing Your Deductions

A deduction is an expenditure that will reduce your taxable income. There are two kinds of deductions: adjustments to income and itemized deductions. The adjustments to income are the better of the two, as they reduce adjusted gross income, or “AGI.” Itemized deductions reduce your taxable income.

First, we will look at some adjustments to income.

Educator expenses apply to K – 12^th grade educators, and are limited to $250 of documented supplies per qualified taxpayer. Expenses exceeding $250 can be taken as a miscellaneous itemized deduction.

A health savings account is an account set up exclusively for paying the qualified medical expenses of the account beneficiary or the beneficiary’s spouse or dependents.

Moving expenses include qualified out-of-pocket expenses or an employer reimbursement that was included in your W-2 form. If you received a non-taxable reimbursement, you cannot deduct the expenses.

Self-employment tax. If you are a sole-proprietor, active partner or have miscellaneous income subject to self-employment tax, you can deduct half of the self-employment tax.

Self-employed pension plans. You can deduct all qualified contributions to self-employed SEP, SIMPLE, and qualified plans.

Self-employed health insurance deduction. For this deduction you must be a sole proprietor or an active partner with net business income or a more than 2% shareholder of an S-corporation. The deduction is limited to net profit. Qualified long-term care insurance premiums, subject to age limitations, are also deductible.

Penalty on early withdrawal of savings is deductible and you will find this fee on your form 1099-INT. These penalties are typically incurred when you cash in a CD prematurely.

Alimony paid is deductible, but you must include the Social Security number of the recipient.

IRA deduction. Report only deductible traditional IRA contributions. Roth IRA contributions are not deductible.

Student loan interest. Up to $2,500 of the interest paid on a qualified student loan is deductible. There are income limitations. You will receive Form 1098-E from the entity to which you paid the student loan interest.

Tuition and fees deduction. Up to $4,000 of higher education tuition and fees can be deducted by taxpayers with an AGI under $80,000 if single, or $160,000 if married filing jointly.

For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-6188 Address: 123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz

Mid-Year Tax Planning for 2014

The 2013 tax filing season has come and gone and now it's time to think about tax planning for tax year 2014. Items which could impact your 2014 taxes include certain life events and expired tax provisions.

Certain Life Events

Have you recently had a birth, adoption, or death in your family? Have you gotten married, divorced, retired, or changed jobs this year? If any of these life events occur in 2014, we need to discuss the potential impact on your 2014 taxes. For example:

1) For Qualifying Children under the age of 17, a tax credit up to $1,000 per qualifying child may be allowed (which may be refundable).

2) If you have retired (or are planning on retiring), we need to analyze how your change in income resulting from receiving IRS or pension distributions, and/or Social Security benefits will impact your tax liability.

3) A divorce or marriage could impact your tax situation in multiple ways. For example, alimony paid or received, deductions for mortgage interest and real estate taxes on your home, QDROs (qualified domestic relation orders) and potential changes in the standard deduction and personal exemptions allowed.

Expiring Tax Provisions

Given the current political climate, it is not known if or when an agreement on extending the Expiring Tax Provisions ("extenders") may be reached. These extenders have made tax planning a challenge for both the taxpayers and tax professionals. Therefore, if any of these provisions impact you, it is important that you contact us so that we may discuss the possible tax consequences:

1) Sales Tax Deduction: Prior to 01/01/2014, taxpayers may have been eligible to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A. This included the sales tax paid on the purchase of a vehicle. This deduction is no longer available to individuals.

2) Mortgage Insurance Premiums: Prior to 01/01/2014, taxpayers may have been eligible to deduct the amounts paid for qualified mortgage insurance premiums along with their mortgage interest (subject to adjusted gross income limitations). Effective 01/01/2014, no deduction is allowed for these premiums paid or accrued after this date.

3) Tax-free Distributions from Individual Retirement Plans for Charitable Purposes: Prior to 01/01/2014, taxpayers over 70 1/2 may have been eligible to exclude from their gross income distributions up to $100,000 from their IRA to a qualified charitable organization. This permitted taxpayers to satisfy their Required Minimum Distribution (RMD) and not include the amount in their gross income. As this reduced their Adjusted Gross Income (AGI), which favorably impacted the taxable amount of Social Security benefits received, this was a large tax advantage for taxpayers. This special distribution provision is not available for distributions after 2013.

4) Qualified Principal Residence Debt Exclusion: Prior to 01/01/2014, the discharge of principal residence debt (qualified mortgage on a taxpayer's main home incurred to buy, build or substantially improve his or her main home) was generally excluded from gross income. As may taxpayers are still experiencing financial difficulties resulting in foreclosures, short sales or debt forgiveness on their primary residences, the tax ramifications for 2014 will have major tax consequences.

Other Steps to Consider Before the End of the Year

You should thoroughly review your situation before year end to determine the best tax strategies for 2014 and the impact on 2015 as well. Accelerating income/deferring deductions into 2014 or deferring income/accelerating deductions to 2015 are just a couple of approaches that could benefit you.

If you have any foreign assets, be aware that there are reporting and filing requirements for those assets. Noncompliance carries stiff penalties.

For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-6188 Address: 123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz

Expertise of the Enrolled Agent

What is an enrolled agent?
An enrolled agent (EA) is a federally licensed tax practitioner who has proven technical expertise in the field of taxation. Enrolled agents are empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service (IRS) for audits, collections, and appeals. Only EAs, attorneys and certified public accountants (CPAs) may represent taxpayers before the IRS.

How can an EA help me?
Enrolled agents advise, represent, and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements. The expertise of EAs in the continuously changing field of taxation enables them to effectively represent taxpayers audited by the IRS.

Privilege and the Enrolled Agent
The IRS Restructuring and Reform Act of 1998 allows federally authorized practitioners (those bound by U.S. Department of the Treasury Circular 230 regulations) a limited client privilege. This privilege allows confidentiality between the taxpayer and the enrolled agent under certain conditions. The privilege applies to situations in which the taxpayer is being represented in cases involving audits and collection matters. It is not applicable to the preparation and filing of a tax return. This privilege does not apply to state tax matters, although a number of states have an accountant-client privilege.

Are enrolled agents required to take continuing professional education?
In addition to the stringent testing and application process, the IRS requires enrolled agents to complete 72 hours of continuing professional education, reported every three years, to maintain their EA status. NAEA members are obligated to complete 90 hours per three-year reporting period. Because of the knowledge necessary to become an EA and the requirements to maintain the license, there are only about 40,000 practicing EAs.

What are the differences between enrolled agents and other tax professionals?
Only EAs are required to demonstrate to the IRS their competence in matters of taxation before they may represent a taxpayer before the IRS. Unlike attorneys and CPAs, who may or may not choose to specialize in taxes, all EAs specialize in taxation. EAs are the only taxpayer representatives who receive their right to practice from the U.S. Government (CPAs and attorneys are licensed by the states).

Are enrolled agents bound by standards?
Enrolled agents are required to abide by the provisions of U.S. Department of the Treasury Circular 230, which provides the regulations governing the practice of EAs before the IRS. National Association of Enrolled Agents (NAEA) members also are bound by the NAEA Code of Ethics and Rules of Professional Conduct.

Why should I choose an enrolled agent who is a member of the National Association of Enrolled Agents?
The principal mission of the National Association of Enrolled Agents and its members is qualified, accurate, and ethical representation of the financial positions of taxpayers before governmental agencies. Members of NAEA must fulfill continuing professional education requirements that exceed the IRS required minimum. NAEA members comprise a strong network of experienced, well-trained tax professionals who effectively represent their clients and work to make the tax code fair and reasonably enforced.

At Elite Bookkeeping & Tax Services we have two Enrolled Agents who are NAEA members- Sara Zaro and Robyn Yelton. Feel free to call us if we may be of assistance.

For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-6188 Address: 123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz

Small Tax-Exempts Annual Reporting Reminder

For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-6188 Address: 123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz

Home Based Businesses- New Optional Deduction

The Internal Revenue Service recently reminded people with home-based businesses that this year for the first time they can choose a new simplified option for claiming the deduction for business use of a home.

In tax year 2011, the most recent year for which figures are available, some 3.3 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction) totaling nearly $10 billion.

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

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For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-6188 Address: 123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz

Year End Tax Tips from the IRS

For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-6188 Address: 123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz