Good From Long Distance
As you can see from this video, I'm good from long distance! Technology enables me to take care of clients across the country with the same personal care that you would get from going to your local office.
The Bonus Gift Card Delusion
With the holiday season upon us, odds are you have heard of all your favorite restaurants offering a promotion along the lines of, “Buy a $50 gift card, and receive a $10 bonus card.” This sounds like a great deal, right? Sadly, these deals are often misleading and downright shameful.
What you don’t often notice about these deals are all the restrictions. More often than not, the bonus card you receive is not an additional gift card – to be used like cash, but rather a coupon. It may still come as something that looks like a gift card, but odds are, that’s not how the company will treat it.
So what’s the big deal with these bonus cards being treated like coupons? Well, I’m sure you’ve all looked at a coupon and noticed the bevy of restrictions that most of them carry. The same is often true with these bonus cards. Some of the more common restrictions:
-not valid with any other offers
-only valid on certain dates
-cannot be used for gratuity or tax
-may not be used for alcoholic beverages
My wife and I fell victim to this delusion a couple of years back. We bought gift cards at a restaurant we frequent during the holiday season for the added benefit of the bonus card. The next visit we went to use our bonus gift card. The waitress pointed to the tiny print at the bottom that noted that the bonus card wasn’t valid yet. Ok. Not a huge deal. We went there again when the coupon was valid. My wife and I did a buy one get one deal and attempted to use our bonus card. The waitress then informed us that since the card itself was like a coupon, we could not use it in conjunction. We were frustrated and the bonus card/coupon nearly expired by the time we were able to use it.
I love that companies put out coupons. I respect their right to put whatever restrictions they want on their coupons. My beef with these promotions is that they are completely misleading to the average consumer. IF they would label their promotion, “Buy $50 in gift cards, get a $10 off coupon.” I would have no problem. Then again, that promotion probably wouldn’t sell as many gift cards.
Granted, not all companies do this. Some give out legitimate bonus gift cards, and my hats are off to them. The point of this article is simple though. BE CAREFUL! Make sure the deal you think you’re getting is actually a deal.
If you are looking to buy gift cards this year, why not buy them from a place such as http://www.giftcardrescue.com/ . There you can get guaranteed gift cards for up to 30% off. Most popular businesses are between 5-15% off. It’s simple. It’s safe. And there aren’t a bunch of hoops to jump through.
What you don’t often notice about these deals are all the restrictions. More often than not, the bonus card you receive is not an additional gift card – to be used like cash, but rather a coupon. It may still come as something that looks like a gift card, but odds are, that’s not how the company will treat it.
So what’s the big deal with these bonus cards being treated like coupons? Well, I’m sure you’ve all looked at a coupon and noticed the bevy of restrictions that most of them carry. The same is often true with these bonus cards. Some of the more common restrictions:
-not valid with any other offers
-only valid on certain dates
-cannot be used for gratuity or tax
-may not be used for alcoholic beverages
My wife and I fell victim to this delusion a couple of years back. We bought gift cards at a restaurant we frequent during the holiday season for the added benefit of the bonus card. The next visit we went to use our bonus gift card. The waitress pointed to the tiny print at the bottom that noted that the bonus card wasn’t valid yet. Ok. Not a huge deal. We went there again when the coupon was valid. My wife and I did a buy one get one deal and attempted to use our bonus card. The waitress then informed us that since the card itself was like a coupon, we could not use it in conjunction. We were frustrated and the bonus card/coupon nearly expired by the time we were able to use it.
I love that companies put out coupons. I respect their right to put whatever restrictions they want on their coupons. My beef with these promotions is that they are completely misleading to the average consumer. IF they would label their promotion, “Buy $50 in gift cards, get a $10 off coupon.” I would have no problem. Then again, that promotion probably wouldn’t sell as many gift cards.
Granted, not all companies do this. Some give out legitimate bonus gift cards, and my hats are off to them. The point of this article is simple though. BE CAREFUL! Make sure the deal you think you’re getting is actually a deal.
If you are looking to buy gift cards this year, why not buy them from a place such as http://www.giftcardrescue.com/ . There you can get guaranteed gift cards for up to 30% off. Most popular businesses are between 5-15% off. It’s simple. It’s safe. And there aren’t a bunch of hoops to jump through.
Tax Brackets: Not nearly as fun as the NCAA kind.
“I’m worried about making more money because I’m afraid it will move me into the next tax bracket!”
Have you ever heard anyone say anything like that? Have you ever thought that yourself? Well, put your mind at ease!
Yes, it’s true; the US has a progressive tax system. Typically, the more you make the higher percentage of your money the government will take. However, it may not work the way you think.
Everyone has probably heard the phrase, “tax bracket,” but may not know exactly what it means. Put simply, if your taxable income falls within a certain range, or bracket, you are taxed at that bracket’s rate.
Now, bear in mind, the numbers I use in my examples are just nice round numbers to make the examples clear, not the actual IRS rates.
Example: Let’s say the brackets are every $10,000. So $0-$10,000 will be taxed at 10%, $10,001-$20,000 will be taxed at 20%, etc. A lot of people think, “Oh, if I’m making $10,000 now it will be better for me not to take the raise because I don’t want my income to be taxed at the 20% rate.” What people don’t realize is that only the amount in excess of the lower bracket is taxed at the higher rate. So if you get a $2,000 raise to $12,000, your first $10,000 is still taxed at 10%.Then the remaining $2,000 is taxed at the 20%.
If you are interested in what the IRS numbers actually are, here’s a link:
http://www.forbes.com/sites/kellyphillipserb/2013/10/31/irs-announces-2014-tax-brackets-standard-deduction-amounts-and-more/
If all this stuff still sounds too confusing, give me a call at (386)214-4929 or email me at Brett@PorterEA.com, and I will be happy to clear it up for you!
Have you ever heard anyone say anything like that? Have you ever thought that yourself? Well, put your mind at ease!
Yes, it’s true; the US has a progressive tax system. Typically, the more you make the higher percentage of your money the government will take. However, it may not work the way you think.
Everyone has probably heard the phrase, “tax bracket,” but may not know exactly what it means. Put simply, if your taxable income falls within a certain range, or bracket, you are taxed at that bracket’s rate.
Now, bear in mind, the numbers I use in my examples are just nice round numbers to make the examples clear, not the actual IRS rates.
Example: Let’s say the brackets are every $10,000. So $0-$10,000 will be taxed at 10%, $10,001-$20,000 will be taxed at 20%, etc. A lot of people think, “Oh, if I’m making $10,000 now it will be better for me not to take the raise because I don’t want my income to be taxed at the 20% rate.” What people don’t realize is that only the amount in excess of the lower bracket is taxed at the higher rate. So if you get a $2,000 raise to $12,000, your first $10,000 is still taxed at 10%.Then the remaining $2,000 is taxed at the 20%.
If you are interested in what the IRS numbers actually are, here’s a link:
http://www.forbes.com/sites/kellyphillipserb/2013/10/31/irs-announces-2014-tax-brackets-standard-deduction-amounts-and-more/
If all this stuff still sounds too confusing, give me a call at (386)214-4929 or email me at Brett@PorterEA.com, and I will be happy to clear it up for you!
Self-Employed VS. S-Corporation
Which is Best for Your Small Business?
Disclaimer: This article represents only the opinion of Brett Porter, E.A. It is not meant to be an end all discussion on what is best for you. Your circumstances may vary. This article is also not meant to be used for tax evasion, but for legally paying the least amount of taxes for your situation.
There are four basic types of business entities: self-employed, partnership, S-Corporation, and C-Corporation. As you can tell from its omission in the title, I don’t care much for partnerships. If you are what most people consider a small business, a C-Corp probably is never going to be advantageous. So that leaves us with self-employed and S-Corps.
Let’s begin with the self-employed. Being self-employed is quite simple for tax purposes. No additional tax returns are needed as all your business income/expenses are just reported on Schedule C of your 1040. You don’t have to incorporate with your state, although you still may be liable for state, county, or city business taxes. On the flip side, everything you profit is going to be subject to FICA/self-employment/employment taxes. These terms encompass social security and Medicare taxes. As a self-employed person you are both the employee and employer, and therefore the government holds you responsible for the employee and employer’s share of these taxes, a total of 15.3%. Social security is 6.2% for the employer and employee – 12.4% total. Medicare is 1.45% for the employer and employee – 2.9% total. You owe that 15.3% on whatever your profit from your self-employed business. On top of this, the profit is taxable at ordinary income levels.
Let’s say you make $10,000 with your self-employed business. For example’s sake, let’s assume you made no other income. Well, $10,000 less your standard deduction of $6,200 and personal exemption of $3,950 leaves you with -$150.00 taxable income. Since you have negative taxable income, you shouldn’t owe any tax, correct? Wrong. You still owe those employment taxes on the profit of your self-employed business regardless of whether or not you have any taxable income. So on that $10,000, you will still owe $1,530 in taxes even though you had no taxable income. The government is so kind, huh?
Alright, now time to look at S-Corps. With an S-Corp, you are required to do a tax return just for the business – an 1120-S. The profit on this tax return is not taxable on this return, but rather, the income flows through to your personal return via a K-1, and it is there the income is taxed at ordinary income levels. Now if you haven’t picked up on it yet, these profits, unlike the ones from being self-employed, are not subject to FICA taxes. However, you are supposed to pay yourself a reasonable wage based on whatever it is your doing. So if your company makes $30,000 before wages paid and you decide that $15,000 is a reasonable salary for your job, well, you just avoided FICA taxes on that extra $15,000, or $2,295 ($15,000x15.3%). You will still pay the FICA taxes on the $15,000 you pay yourself, but the $15,000 ($30,000 profit before wages-15,000 wages paid to yourself) just gets taxed as ordinary income and avoids the FICA taxes.
However, with an S-Corporation, you will run into some other fees. If you can’t do it yourself, you will probably spend $300+ (depending on the size of your company) in the preparation of your business return. You will probably pay a state corporation fee of around $75-250. There may also be county/city business taxes as well. You may also spend between $200-500 a year for someone to do your payroll and file payroll returns. Given the above scenario, even with these additional expenses, you are still saving roughly $1,145 a year. Seems like a pretty good deal, right?
This article isn’t all inclusive. There are other factors to consider not included in this short article. Please, contact a qualified accountant (preferably me!) if you have any questions regarding your specific situation. The examples given were just for clarification. They were not meant to factor in all the complexities of a tax return.
If you have any questions, please ask! I’m happy to assist the best that I can!
Does my deduction even matter?
Why Tax Deductible Items Aren’t What They Appear
Every year you hear it. You may even say it yourself. “I can just write it off on my taxes.” But can you really? Most people are either completely ignorant or completely confused as to whether or not all your tax deductions are even making a difference.
Why is this? It seems to most people that their tax return is a huge burden. They don’t want to think about it throughout the year. They don’t want to do it come April. They most certainly don’t want to review what all those numbers are on their 1040. They just want to hand in their information to their accountant, or punch it in to tax software, and be done with it.
Do you know if you itemized last year? A lot of people don’t even know that there are two options – itemizing or the standard deduction, or what these options mean. They just hear throughout their life that certain items are deductible and assume that those items are going to affect their tax return.
So let’s go over what these two options are. We’ll start with the standard deduction. Every year the government comes out with the standard deduction. This amount varies based on your filing status. For single filers - $6,200, for head of household - $9,100, for married filing jointly - $12,400, and $6,200 for married filing separately. This amount gets deducted from your adjusted gross income (AGI) along with your exemption deductions to figure out your taxable income.
For example, you’re a single school teacher with an AGI of $40,000. Assuming you take the standard deduction, your taxable income would be $29,850 (40,000-6,200 standard deduction-3,950 exemption deduction). That’s how the standard deduction works.
Itemizing is a little more confusing. But in general, if your itemized deductions are greater than your standard deduction, you will itemize. What are itemized deductions? In general, they are expenses that the government has decided to make deductible on tax returns. Some of the more common itemized deductions are unreimbursed medical expenses, mortgage interest, real estate taxes, charitable contributions, and miscellaneous itemized deductions subject to the 2% floor.
So you had a rough year health wise, racked up thousands of dollars in medical expenses, but at least it’ll help lower your taxes this year, right? Not so fast. Medical expenses are subject to what’s known as a 10% floor (used to be 7.5% before Obamacare went and messed that up). What this means is that none of your medical expenses count towards your itemized deductions until they are greater than 10% of your AGI. Let’s say you and your spouse had a new baby this year. Your insurance isn’t great, so the birth cost you $9,800 out of pocket. You both had good jobs, and between the two of you, had an AGI of $100,000. Guess what amount of the $9,800 in medical expenses helps you on your taxes? $0.00! Absolutely none of it. Pretty terrible, huh? In order for any of your medical expenses to count towards your itemized deductions, you would need $10,001 (100,000 x 10%=10,000) in medical expenses. Even then it may not help you if you don’t have enough other itemized expenses to put you over the standard deduction.
What’s included as a medical expense? First, it must be unreimbursed! If you pay for it, then your insurance company pays you back, it doesn’t count. Common medical deductions include: insurance premiums, doctor co pays, prescription medicine, and hospital stays. Some of the more uncommon deductions are miles driven for medical reasons, medical equipment (CPAP, crutches, wheelchair, adjustable bed (if needed for medical reasons)), improvements made to your house to the extent they don’t increase the value of your house (wheelchair ramps, chair lifts, shower seats, etc.), bandages, knee/elbow/wrist braces, contact lenses, contact solution, contact cases, and glasses. It is important to note that for some reason, over the counter medicines are NOT deductible.
The mortgage interest deduction is a bit simpler to understand. You can deduct the interest paid during the current year on a mortgage for your main home and a second home that’s not a rental (for those lucky enough to have one). If your mortgages total more than $1,000,000, you can only deduct the interest on the first $1,000,000. If you have three homes, you can pick two of the mortgages to take the deduction for. Also, mortgage insurance premiums count here too! See what I said? A lot simpler than medical expenses.
Real estate taxes are simpler yet. If you pay real estate taxes during the tax year, you can deduct them.
Charitable contributions are those gifts to companies that are IRS registered charities. These can include churches, hospitals, schools, veteran’s organizations, etc. These contributions can be cash or non cash. Your cash contributions cannot exceed 50% of your AGI for most charities. For veteran’s organizations and non cash donations, they can’t exceed more than 30% of your AGI. If your donation is greater than $250, you need a receipt from the company. Payments made to an individual are NEVER deductible! So you give $1,000 to help a single mom out with school? You’re an awesome person, but it’s no help on your taxes. Miles driven for charitable purposes are also deductible.
Miscellaneous itemized deductions are deductions subject to the 2% floor. The 2% floor is exactly like the 10% floor for medical deductions, only much smaller. These include things like investment interest paid, safety deposit box rentals, tax return preparation fees, and unreimbursed employee expenses. Unreimbursed employee expenses are exactly like they sound – expenses incurred by you to do your job as an employee that were not reimbursed by the company. These are things like uniforms, tools, etc. A little clarification about uniforms - in order for a uniform to be deductible, it has to be specific and usable only for that job (within reason). Did you get a new job as a waitress at a nice restaurant and have to buy five new dress shirts? Not deductible. Why? Because you can wear those dress shirts anywhere else. Does your employer require their logo to be sewn on to the shirt? Bam! Now they’re deductible.
So after all is said and done, if all these itemized expenses are greater than your standard deduction, congratulations! You can itemize! If not, you can always be thankful that you didn’t have to spend as much of your money as those who itemized!
Why Tax Deductible Items Aren’t What They Appear
Every year you hear it. You may even say it yourself. “I can just write it off on my taxes.” But can you really? Most people are either completely ignorant or completely confused as to whether or not all your tax deductions are even making a difference.
Why is this? It seems to most people that their tax return is a huge burden. They don’t want to think about it throughout the year. They don’t want to do it come April. They most certainly don’t want to review what all those numbers are on their 1040. They just want to hand in their information to their accountant, or punch it in to tax software, and be done with it.
Do you know if you itemized last year? A lot of people don’t even know that there are two options – itemizing or the standard deduction, or what these options mean. They just hear throughout their life that certain items are deductible and assume that those items are going to affect their tax return.
So let’s go over what these two options are. We’ll start with the standard deduction. Every year the government comes out with the standard deduction. This amount varies based on your filing status. For single filers - $6,200, for head of household - $9,100, for married filing jointly - $12,400, and $6,200 for married filing separately. This amount gets deducted from your adjusted gross income (AGI) along with your exemption deductions to figure out your taxable income.
For example, you’re a single school teacher with an AGI of $40,000. Assuming you take the standard deduction, your taxable income would be $29,850 (40,000-6,200 standard deduction-3,950 exemption deduction). That’s how the standard deduction works.
Itemizing is a little more confusing. But in general, if your itemized deductions are greater than your standard deduction, you will itemize. What are itemized deductions? In general, they are expenses that the government has decided to make deductible on tax returns. Some of the more common itemized deductions are unreimbursed medical expenses, mortgage interest, real estate taxes, charitable contributions, and miscellaneous itemized deductions subject to the 2% floor.
So you had a rough year health wise, racked up thousands of dollars in medical expenses, but at least it’ll help lower your taxes this year, right? Not so fast. Medical expenses are subject to what’s known as a 10% floor (used to be 7.5% before Obamacare went and messed that up). What this means is that none of your medical expenses count towards your itemized deductions until they are greater than 10% of your AGI. Let’s say you and your spouse had a new baby this year. Your insurance isn’t great, so the birth cost you $9,800 out of pocket. You both had good jobs, and between the two of you, had an AGI of $100,000. Guess what amount of the $9,800 in medical expenses helps you on your taxes? $0.00! Absolutely none of it. Pretty terrible, huh? In order for any of your medical expenses to count towards your itemized deductions, you would need $10,001 (100,000 x 10%=10,000) in medical expenses. Even then it may not help you if you don’t have enough other itemized expenses to put you over the standard deduction.
What’s included as a medical expense? First, it must be unreimbursed! If you pay for it, then your insurance company pays you back, it doesn’t count. Common medical deductions include: insurance premiums, doctor co pays, prescription medicine, and hospital stays. Some of the more uncommon deductions are miles driven for medical reasons, medical equipment (CPAP, crutches, wheelchair, adjustable bed (if needed for medical reasons)), improvements made to your house to the extent they don’t increase the value of your house (wheelchair ramps, chair lifts, shower seats, etc.), bandages, knee/elbow/wrist braces, contact lenses, contact solution, contact cases, and glasses. It is important to note that for some reason, over the counter medicines are NOT deductible.
The mortgage interest deduction is a bit simpler to understand. You can deduct the interest paid during the current year on a mortgage for your main home and a second home that’s not a rental (for those lucky enough to have one). If your mortgages total more than $1,000,000, you can only deduct the interest on the first $1,000,000. If you have three homes, you can pick two of the mortgages to take the deduction for. Also, mortgage insurance premiums count here too! See what I said? A lot simpler than medical expenses.
Real estate taxes are simpler yet. If you pay real estate taxes during the tax year, you can deduct them.
Charitable contributions are those gifts to companies that are IRS registered charities. These can include churches, hospitals, schools, veteran’s organizations, etc. These contributions can be cash or non cash. Your cash contributions cannot exceed 50% of your AGI for most charities. For veteran’s organizations and non cash donations, they can’t exceed more than 30% of your AGI. If your donation is greater than $250, you need a receipt from the company. Payments made to an individual are NEVER deductible! So you give $1,000 to help a single mom out with school? You’re an awesome person, but it’s no help on your taxes. Miles driven for charitable purposes are also deductible.
Miscellaneous itemized deductions are deductions subject to the 2% floor. The 2% floor is exactly like the 10% floor for medical deductions, only much smaller. These include things like investment interest paid, safety deposit box rentals, tax return preparation fees, and unreimbursed employee expenses. Unreimbursed employee expenses are exactly like they sound – expenses incurred by you to do your job as an employee that were not reimbursed by the company. These are things like uniforms, tools, etc. A little clarification about uniforms - in order for a uniform to be deductible, it has to be specific and usable only for that job (within reason). Did you get a new job as a waitress at a nice restaurant and have to buy five new dress shirts? Not deductible. Why? Because you can wear those dress shirts anywhere else. Does your employer require their logo to be sewn on to the shirt? Bam! Now they’re deductible.
So after all is said and done, if all these itemized expenses are greater than your standard deduction, congratulations! You can itemize! If not, you can always be thankful that you didn’t have to spend as much of your money as those who itemized!
What Medical Expenses Are Deductible?
Medical expenses are an itemized deduction. That means if you take the standard deduction, then your medical expenses don’t matter to the IRS. Furthermore, only expenses paid for out of pocket that are not reimbursed by your insurance provider are deductible. Practically every medical expense is deductible. The only major category that isn’t deductible is over the counter meds.
Commonly deducted medical expenses:
-insurance premiums paid by you
-prescription drugs
-doctor, ER, and hospital visits
Medical deductions often overlooked:
-miles driven for medical purposes (to and from doctor, etc)
-medical supplies such as crutches, wheelchairs, eyeglasses, contact lenses, contact lens solution, etc.
-improvements to your home-only to the extent of the cost of the improvement over the value added to your house. For example, you add an elevator to your house at a cost of $10,000. The elevator increases the value of your house by $8,000. $2,000 of the cost of the elevator is deductible as a medical expense.
Medical deductions you would think would be deductible, but aren’t:
-over-the-counter medications
-cosmetic surgery (to the extent that it’s not related to a medical injury)
Medical deductions are now subject to a 10% floor. This means that unless your medical deductions are over 10% of your adjusted gross income, they are not deductible. For example, John Doe makes $100,000 a year. He has $9,500 worth of medical deductions. Because $10,000 ($100,000 x .1 = $10,000)>$9,500, none of his medical deductions count. Before Obamacare, the number was 7.5%. Before Obamacare, using the above numbers, $2,000 of his medical expenses would have been deductible ($100,000 x .075 = $7,500. $9,500 - $7,500 = $2,000). For 2013-2016, for those 65 and older and their spouses, the old 7.5% rate will apply.
Commonly deducted medical expenses:
-insurance premiums paid by you
-prescription drugs
-doctor, ER, and hospital visits
Medical deductions often overlooked:
-miles driven for medical purposes (to and from doctor, etc)
-medical supplies such as crutches, wheelchairs, eyeglasses, contact lenses, contact lens solution, etc.
-improvements to your home-only to the extent of the cost of the improvement over the value added to your house. For example, you add an elevator to your house at a cost of $10,000. The elevator increases the value of your house by $8,000. $2,000 of the cost of the elevator is deductible as a medical expense.
Medical deductions you would think would be deductible, but aren’t:
-over-the-counter medications
-cosmetic surgery (to the extent that it’s not related to a medical injury)
Medical deductions are now subject to a 10% floor. This means that unless your medical deductions are over 10% of your adjusted gross income, they are not deductible. For example, John Doe makes $100,000 a year. He has $9,500 worth of medical deductions. Because $10,000 ($100,000 x .1 = $10,000)>$9,500, none of his medical deductions count. Before Obamacare, the number was 7.5%. Before Obamacare, using the above numbers, $2,000 of his medical expenses would have been deductible ($100,000 x .075 = $7,500. $9,500 - $7,500 = $2,000). For 2013-2016, for those 65 and older and their spouses, the old 7.5% rate will apply.
Phone: (386) 214-4929 Email: Brett@PorterEA.com