Tom DiTullio, Author at TMD Accounting

11 Aug

Who Can Claim Head Of Household?

Many taxpayers are confused about what filing as a head of household requires. The IRS has some guidelines in place to assist taxpayers with figuring out whether or not they can file with this status. Filing as head of household may offer you the benefits of having a lower taxable income and a larger refund than filing as single. In order to qualify, you must meet the eligibility requirements. The accounting team at Thomas M. DiTullio Accounting can assist you with determining your appropriate filing status.

The criteria for this filing status include the following:

You must pay for more than 50 percent of your household expenses;
You must be considered to be unmarried for the tax year; and
You must have a child or dependent who qualifies.

Because some of the terms that are used are confusing, the IRS has some guidelines to help.

What is the IRS definition of head of household, and what is the difference between single and head of household on taxes?

The IRS defines head of household as a tax-filing status that can be used by unmarried or single taxpayers who keep homes for qualifying persons. This status offers some advantages over filing as a single person. You may enjoy a lower tax rate, a higher standard deduction and a potentially larger refund with this status.

Who can file as head of household?

You are eligible to claim head of household status if the following applies:

You were not married or you were considered to be unmarried on the last day of the tax year.
You paid more than 50 percent of your household costs during the year.
A qualifying person lived with you for more than six months other than temporary absences.

Maintaining a household

You must have paid more than 50 percent of the expenses required to maintain your home during the year. This includes paying more than half of your total household bills. If you receive some financial help for your household expenses from another person, you may still qualify as long as you used your own earnings to pay at least 50 percent of the expenses.

Considered unmarried

You must also be considered to be unmarried on the last day of the tax year. This means that you have either never been married, are legally separated or divorced, lived away from your spouse for six months or more of the second part of the tax year or you have a nonresident alien spouse and a child who qualifies and who lived with you for more than six months. You will still be considered to be married if the absence from your spouse was because of a temporary reason such as military service, college attendance, medical treatment or business trips.

Qualifying child

A qualifying child is one who meets the following criteria:

Is your biological, step or foster child, or he or she is your half sibling, step sibling, sibling or a descendant
Lived with you for more than six months
Is younger than you
Is younger than 19 by the end of the year or under 24 if he or she is a full-time student in college
Did not pay more than 50 percent of his or her own living expenses

Qualifying dependent

If you do not have a qualifying child, you can still file as head of household if you have a qualifying dependent:

Step, foster or biological children or half siblings, step siblings, siblings or descendants who are older than the age requirements but who are permanently and totally disabled
Your parent
Your sister-, brother-, mother-, father-, daughter- or son-in-law, or your nephew, niece, uncle, aunt, stepmother or stepfather

You must have paid for more than 50 percent of a qualifying dependent’s expenses during the tax year.

If you need help with your taxes and your filing status, contact the professionals at Thomas M. DiTullio Accounting today.

10 Aug

How to know if it’s REALLY the IRS contacting you and not a scam

Tom DiTullio

Tax Planning tax scam

There are so many “scams” out there it can be difficult to know if the IRS is really on the other end of the phone line or outside knocking at your door.

The IRS may call a taxpayer AFTER mailing a notice or to confirm an appointment.

If you DO receive a legitimate phone call from the IRS:

They will NEVER ask for a specific payment method like pre-paid debit cards or store gift cards.
They will NEVER threaten lawsuits, arrest, deportation or other action for nonpayment.
They will NEVER ask for credit or debit card numbers over the phone.

If you get a visit from an IRS Revenue Officer:

They may ask for payment for taxes owed, delinquent tax returns, or businesses falling behind on payroll taxes. Payment will never be requested to a source other than the US Treasury.

If you get a visit from an IRS Criminal Investigator:

They are investigating and as such, will NOT demand any sort of payment.

No matter HOW you are contacted always, ALWAYS ASK FOR CREDENTIALS.

Over the telephone they will provide their name and badge number.

In person, they will provide their Personal Identity Verification Credentials or, as in the case of the investigators, they will provide their badge and law enforcement credentials.

PAYING TAXES

You should NEVER use a preloaded debit card or wire transfer to make a payment. All payments made for taxes will be to “US Treasury”. You can also use “Internal Revenue Service” as the payee.

If you have any questions or concerns about this issue please contact Thomas M DiTullio Accounting where “Numbers Matter – People Count”.

4 Aug

Selling Your Home In 2017? Here’s What You Need To Know.

Tom DiTullio

Tax Planning

The GOOD NEWS:

If you sell your primary residence and the GAIN from the sale is NOT more than $250,000 (or $500,000 if married-filing-joint) then you may be able to exclude all or part of the gain from your income.

As always, there are tests and exceptions to determine if you qualify for any exclusions.

You must pass the “ownership and use” test. For the 5-year period ending on the date of the sale, you must have owned and lived in the home as your primary residence for at least two years.
If all or part of the gain is not excludable or If you receive form 1099S – Proceeds from Real Estate Transactions – or you choose not to claim the exclusion, then you must report the sale of the home on your tax return.
If you sell your “2^nd Home” (i.e. vacation property) you MUST report the gain as it IS NOT excludable.

There are exceptions to the rules including, but not limited to, those with disabilities and certain members of the military.

The BAD NEWS:

If you have a LOSS on the sale of your primary residence, or your 2^nd home (i.e. vacation property) it is NOT deductible.

For more information, or if you have any questions at all, please contact us here at Thomas M DiTullio Accounting.

AVOID SCAMS – The IRS will not initiate contact with you via social media or text.

31 Jul

Do you like a big refund or do you prefer to “break even”?

Tom DiTullio

Tax Planning

Every client is different. Some like a big refund with their tax return as a “forced savings” for that family vacation or home improvements. Some like to “break even” and get their money during the year for monthly expenses. Whichever you are NOW is the time to review your tax withholding.

If you are a W2 employee, look at your 2016 tax return (form 1040) page 2, line 63. This was your “total tax” for the year. If all things remain the same, for example wages, interest income, dividends, etc., then you will have a pretty good idea of your 2017 tax liability. Now look at your last paycheck stub under “federal withholding”. Do the math.

If you think you will need more withheld from your paycheck each pay period, then go to your employer and get form W4. If you want MORE withheld, DECREASE the number of your allowances (line 5). For example, if you claim Married with 4 allowances, decrease that to 3. More money will be withheld each pay period.

On the other hand, if you feel that too much is being withheld, INCREASE the number of your allowances.

If you do not claim any allowances (Married 0, or Single 0) and you want more money withheld from your paycheck, use line 6 “Additional Amount Withheld”. Enter $10, $20 or whatever amount you feel you will need and your employer WILL withhold that amount from each paycheck. Keeping in mind that your take home pay will be less but the year-end benefit will be greater.

There are more ways you can change your W4 withholding to optimize your tax benefit at the end of the year.

Please contact Thomas M DiTullio Accounting so we may discuss your personal tax situation. We will be happy to assist you.

25 Jul

Quick Guide to the Child and Dependent Care Tax Credit

Tom DiTullio

Tax Planning

Do you send your children to Summer Camp because you must work or look for a job?

Do you care for your disabled Spouse or other dependent?

If so, you may be eligible to deduct Dependent Care Expenses on your 2017 income tax return.

There are certain eligibility requirements to take advantage of this deduction. The requirements include, but are not limited to:

The person for which you are claiming the deduction must be “Qualified”. (i.e. your child under the age of 13, disabled spouse or other dependent that lived with you more than half of the year)
The expenses incurred must have been necessary so the taxpayer could work or look for work.
The taxpayer must have earned income.

Since every family is different, special circumstances may apply.

Please contact Thomas M DiTullio Accounting so we may discuss your situation and, if eligible, take advantage of this Tax Credit in the upcoming 2017 tax year.

Please keep in mind the Internal Revenue Service will never initiate contact with you via Social Media or Text Message.

21 Jul

What Is Payroll?

Tom DiTullio

Payroll

A company’s employee payroll might be the largest single expense of a small business. It is comprised of the total wages paid to employees and other workers such as independent contractors. Processing payroll is also very complex, involving making deductions, collecting insurance premiums, collecting retirement contributions and calculating tax withholdings.

If mistakes are made with payroll, your business may face substantial penalties from the IRS and be subject to litigation from employees. This makes it extremely important for you to ensure that your payroll is completed properly. When you outsource your payroll to the accountants at Tom DiTullio Accounting, you may gain more confidence that it will be completed accurately and on time.

What makes up payroll

Payroll is divided into four main parts, including the gross wages, benefits and Social Security and Medicare withholdings and taxes. What your employees receive after the deductions have been made are their net incomes.

Independent contractors and freelancers are treated differently. Since they are not employees, they receive their gross pay without deductions. They are then individually responsible for paying their own taxes and purchasing their own benefits.

Why payroll processing is complex

One of the reasons that it is difficult to manage payroll is the required tax calculations and payments. Employers have to calculate the state and federal income taxes and then send the payments to the government. They must also submit withholding reports along with the payments that they send. Employees fill out IRS Form W-4 in order to specify their number of dependents so that withholding allowances can be calculated.

After calculating the allowances, the federal income taxes are calculated from the tax tables in Publication 15. These taxes are reported on IRS Form 941 and are paid at the same time that your company makes its Medicare and Social Security payments.

Payroll taxes must also be calculated for both the state and federal governments. Payroll taxes were the second largest type of revenue that the federal government had in 2015. In addition, employers are also required to submit 6 percent of their gross wages up to $7,000 per worker to fund the federal unemployment taxes for each worker. This is a business expense only and is not paid for from the employees’ pay. States also have their own unemployment plans, and if you have employees in multiple states, you will have to comply with each of their individual unemployment requirements.

Running payroll

While some small businesses run their own payrolls using accounting software, it is not advisable. When you try to complete your payroll on your own, you run the risk of making costly errors. It is also a very time-consuming task and takes away from your ability to attend to the other needs of your business. You would need to be able to set up new employees and to process the paperwork for different types of benefits such as health insurance plans. You would also need to withhold the proper amounts of state and federal income taxes, determine gross pay rates and collect all of the needed paperwork. Finally, you would then need to pay your employees their net pay amounts and send in the taxes and other withholdings on time and to the right recipients.

Get help from Tom DiTullio Accounting

When you choose to outsource your small business payroll to Tom DiTullio Accounting, you can remove the hassle of having to complete it yourself. Our experienced accountants understand the requirements and how to make the calculations accurately. We can pay your employees by paper checks that we deliver to your business in sealed envelopes or by direct deposit into their bank accounts. To learn more about how we can help, call Tom DiTullio Accounting today.

14 Jul

Why Your Small Business Needs An Accountant

Tom DiTullio

Small Business

As a small business owner, you likely spend too much time during each week taking care of the accounting side of your business. You might feel as if your business is too small to consider hiring an accountant. What many business owners fail to realize is that when you try to complete your small business accounting processes by yourself, it can take away from your ability to conduct the other important tasks of the company while also being highly frustrated. You might be wondering, “How do I find a small business accountant near me?” Tom DiTullio Accounting is available to help you with all of your business accounting needs.

Spend your time on the important tasks

When you choose to outsource your business accounting tasks to an accountant for small business services, you can free up your time to such things as working towards securing clients, customers, new business and your goals rather than on daily administrative and bookkeeping tasks.

In order to find an accountant who can meet your needs, you will want to find a firm that is able to offer a range of services from which you can choose. This may help you to have only the services that your particular business requires while also allowing you to get back to doing what you do best.

Access to expert help and advice

The duties and responsibilities of an accountant are myriad. Your ideal accounting services should comply with IRS standards. Attending to these tasks may be difficult when you also need to pay attention to growing your business. If you try to do them yourself, you may make mistakes. An experienced accountant from Tom DiTullio accounting can offer strategic insight and advice about the particular ins and outs of your business.

Putting a focus on your business’s growth

Outsourcing your accounting can also help you to focus on the areas in which your business may grow by looking at your patterns of cash flow. You can then optimize your pricing and inventory to enhance your bottom line. This may help you to understand how to grow your business rather than getting lost in the minutiae of daily administrative tasks.

Tax considerations

Tax laws change frequently, and staying on top of the changes can be difficult for most small business owners. With our help, you can feel more confident that your taxes will be calculated and submitted properly while also understanding the various deductions you may be eligible to take. This can help you to avoid potential penalties while also helping you to reduce your business’s tax bill.

Audit representation and readiness

When you have a good accounting team on your side, you can make certain that your business is prepared in the event that it is audited. We can help you to prepare for an audit and navigate your way through it. We can also help by making certain that you understand and implement the best practices for document and receipt retention so that you will not be caught unaware.

Tom DiTullio Accounting understands how important accounting services are for the success of your business. Call us today to schedule your consultation so that you can learn more about how we can help you succeed.

19 Jun

The IRS Private Debt Collection Program: What You Need To Know

Tom DiTullio

Tax Planning IRS

The Internal Revenue Service has initiated a Private Debt Collection program. They have selected four contractors to implement this program.

What this means to you – if you have an outstanding debt with the IRS and you are selected as part of this program, the IRS WILL ALWAYS notify you regarding the transfer of your account to a private collection agency.

The four groups selected for this program are:

CBE Group of Cedar Falls, Iowa,
P.O. Box 2217
Waterloo, IA 50704
1-800-910-5837
Conserve of Fairport, NY
P.O. Box 307
Fairport, NY 14450-0307
1-844-853-4875
Performant of Livermore, CA
P.O. Box 9045
Pleasanton CA 94566-9045
1-844-807-9367
Pioneer of Horseheads, NY
PO Box 500
Horseheads, NY 14845
1-800-448-3531

These four are the ONLY firms authorized to represent the IRS. Also, the Internal Revenue Service will never assign your account to more than one of these firms.

You can also check your IRS account balance online at IRS.gov/balancedue.

If you have questions about this program feel free to give us a call or fill out our contact form.

16 Jun

Is Credit Card Interest Tax Deductible for a Business?

Tom DiTullio

Small Business Tax Deductible

If you are a small business owner, it is likely that you dread tax time. The tax code is highly complex when it comes to your business expenses and the tax deductions that your business can take. It is important that you don’t miss available deductions because out of every $100 in deductions, your business will save an average of $30. A very substantial expense for most small businesses is the credit card interest that they pay each month. There are times when the law allows you to take a deduction for the interest that your business pays and situations in which a deduction is not allowed.

When credit card interest can be deducted

The interest that is business-related is deductible on your taxes. For example, the interest that you pay on credit card debts and business loans can be deducted if the incurred debts are related to the activities of your business. You are even allowed to deduct the interest that you pay for cash advances if the money was then used for your business. You are only allowed to take a deduction for interest in the year in which your business paid it. The interest that might be deductible might include ATM fees, late fees, finance charges, annual fees, foreign transaction fees and others. In order to take advantage of these deductions, you will need to save all of the relevant credit card statements and receipts to make filing your taxes easier.

When can businesses not deduct credit card interest?

Before the Tax Reform Act was passed in 1986, taking a credit card interest deduction was fairly straightforward. All interest that was paid was deductible even if it was associated with non-business expenses and personal credit cards. Since the law was passed, you are no longer able to deduct interest on your personal debts in order to reduce your taxable income. If you use a personal credit card to pay for business expenses, you will need to keep thorough records and to review them carefully to figure out which expenses were business-related and which ones were not. When you do this, you will then need to calculate the percentage of your total interest payments that you can allocate to your business so that you can take the appropriate deductions.

Steps to make the process easier

There are several steps that you can implement to make filing your returns easier. You can start by maintaining a credit card for your business that is separate from your personal credit cards. This will not only make it easier for you to calculate the interest that you spent for your business-related purposes, it will also allow you to have access to the benefits and rewards that are offered by many business cards. A business credit card may also help your business to build an excellent credit history so that you can secure lower interest rates in the future.

Claiming deductions for your business expenses is important for small business owners. If you do not maximize the deductions that you can take, you are simply losing money. To learn more about your business’s taxes and the deductions that you might take, contact us today by leaving your information in our contact form.

9 Jun

What You Need To Know About Tax Planning For Small Business

Tom DiTullio

Small Business

Some small business owners make the mistake of failing to think about their taxes until the time for filing is drawing close. Instead, tax planning should be a continuing process. At Thomas M. Ditullio Accounting, our team of professionals understands the importance of tax planning, and we work closely with our clients to help them to save money when they file.

What is tax planning for small businesses?

When you engage in tax planning, it involves the process of considering your different options in order to inform you about how you should conduct your transactions in such a way that you might be able to reduce or eliminate your tax liability. Reviewing your expenses and income each month and meeting with your tax professional at Thomas M. Ditullio Accounting at least quarterly might help you to analyze how to take advantage of the deductions, credits and tax provisions that are available to you. It is important for you to understand that using the provisions fraudulently in order to reduce your business’s tax liabilities is considered to be illegal tax evasion. Tax planning is instead a legal way to help you to reduce the tax burden that your business might otherwise face.

Factors that the IRS may consider when it is determining fraud

There are four primary areas that the IRS tends to focus on in order to determine whether or not a business has committed fraud, these include:

Failing to report substantial income, dividends or a portion of receipts
Claiming improper or fictitious deductions
Accounting irregularities such as not keeping good records
Improperly allocating income to related taxpayers in lower brackets

It is very important that you avoid these improper tax strategies.

Strategies for small business tax planning

There are numerous tax strategies that you may have available to you. Your tax planning strategy should be based on its structure in order to accomplish some of the following goals:

Getting a lower tax rate
Reducing your taxable income
Claiming the available credits and deductions
Controlling when taxes have to be paid
Minimizing the effect of the alternative minimum tax
Avoiding tax errors

It can be very difficult to come up with exact estimates, but you are likely already projecting your revenues, cash flow and income for your general planning purposes. The more accurate that your estimates are, the likelier that your tax planning efforts will be successful.

Business entertainment expenses

One legitimate type of deduction that may be available to your business is a deduction for business entertainment expenses. As long as you follow the specific guidelines, these expenses may help you to lower your tax bill. To qualify, the expense must have been incurred either after, during or before a business discussion. The location must be one that is reasonably conducive for business. For example, while a quiet restaurant may pass muster, it is unlikely that a dance club will. Locations that are generally considered to be too distracting include sporting events, hunting trips, skiing trips and theaters. You may take up to 50 percent of your entertainment expenses as a deduction, but you must have good records to support them. The purpose of the meeting must have been arranged for business purposes.

Automobile deductions for businesses

Certain deductions for maintenance and operating costs for your vehicle may be deductible as business expenses if you use it to conduct business. You may be able to deduct the mileage expenses that are allowed by the IRS. The amounts change from year to year, so you will want to talk about the amounts with your tax professional at Tom Ditullio Accounting.

You might be able to maximize your available vehicle deductions if you own two vehicles by including both in your deductions. Your business miles that are driven are determined by your business use. To figure that out, you divide the business miles that were driven by the total miles for each vehicle. This can result in substantial deductions. It is very important that you keep good records, including mileage logs and receipts.

Time spent working at home

Understanding the home office deduction is important, but it is also complicated. If you have a home office, you will need to understand how to conduct business at home in a manner that will allow you to take the deduction. In order to deduct home office space, it must be located in a room that is not used for other purposes. You should also make its purpose stand out by displaying your business phone number and business address on business cards, having your business visitors sign a guest book when they visit and keeping a time and work activity log. You should also keep copies of all of your paid invoice and your receipts. This helps by making it significantly easier to figure out the percentages that should be allocated to your business use of your home.

Under Section 179 of the tax code, you can take immediate deductions for qualified business property that you purchase up to a certain limit. The equipment may be used or new, and it includes some software expenses. Even if you do not qualify for the home office deduction, there may be some deductions that you can still take. Meeting with your tax professional can help you to figure out what deductions might be available to you. To learn more about tax planning, contact Thomas M. Ditullio Accounting today by calling us at 856.228.2205.

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