What If I Get An IRS Tax Audit And I Have No Receipts?

What If I Get An IRS Tax Audit And I Have No Receipts?

Receiving a notice of audit can inflict fear on any small business owner. It can be even worse if you receive an audit notice and do not have any receipts to support the deductions you have claimed for your business. If you are being audited and do not have receipts, there are some ways you can reconstruct your records to support your expense deductions. Here is what you need to know from our tax professionals at TMD Accounting.

 

 

What is an Audit?

Taxpayers have the responsibility to file returns and pay taxes to the IRS each year. They can also write off work-related expenses to offset a portion of their taxes. When the IRS reviews the deductions taxpayers have claimed and the taxes they have paid as a result, the agency sometimes finds some missing or unclear reporting of income or itemized deductions it believes warrant additional scrutiny. When the IRS follows up on these types of issues through a formal inquiry, the process is called an audit.

In most cases, the IRS will send an audit notice to the taxpayer within seven months of when the tax return was filed. However, the agency can send a notice within three years of the return’s filing date. The notice always comes in writing in a letter and not via a phone call. In the letter, the IRS will inform the taxpayer that it intends to conduct an audit and will ask for specific types of documentation for the taxpayer to provide within 30 days of the notice. If you have received an audit notice but need more time to organize your materials, you can request an extension of 30 days.

 

 

What To Do If You Don’t Have Receipts

Receiving an IRS notice that you have been chosen for an audit might be concerning especially if you have missing receipts. However, the IRS might allow you to substantiate some of your expenses in other ways. You will only need to present evidence that the business expense deductions you claimed were valid. If you do not have receipts, you will need to reconstruct a history of your expenses.

It is a better idea to recreate your business’s expenses at the time you are preparing your taxes when you do not have receipts than to wait until you receive an audit notice. Don’t base your deductions on an estimate to ensure that the expenses you deduct can be substantiated if you are chosen for an audit later.

 

 

How to Reconstruct Records For The IRS

It is important to get started immediately to reconstruct your expenses for the audited tax year when you receive an audit notice. It can take some time to recreate your expenses, and starting immediately can help you meet the response deadline.

You can reconstruct your records or provide a good explanation of your deductions. If the IRS rules against you, you can file an appeal. You might also have to argue against an assessment of penalties by presenting facts about how you tried to comply. In many cases, having no records can result in a 20% penalty for negligence.

Follow the tips below to reconstruct your business’s records in response to an audit:

  •  Review your credit card and bank statements – Checking your credit card and bank statements can help you identify different expenses you have paid. They can also be a substitute if you have lost your receipts.
  • Ask for copies from suppliers and vendors – Suppliers and vendors might have duplicate copies of your invoices and receipts. You can ask them if they can provide you with copies.
  • Review your appointment books – If you have claimed travel and meal expenses, you can look at your old appointment books to find relevant information about your travel, its frequency, and the number of clients for whom you provided services.
  • Look at your cell phone records – Your cell phone records might help you to establish your service dates and help to reconstruct your business expenses.
  • Use online map tools to reconstruct mileage – Use map tools online to substantiate your mileage claims. Do not estimate the number of miles traveled per week and multiply it by 52 to arrive at your mileage deduction. Instead, take into account holidays and other periods during which you did not travel for work.

If you estimate your expenses in a different way than the IRS, make sure to draft a declaration and sign it under oath.

 

 

About The Cohan Rule

Lost and missing receipts is a very common issue. The United States Court of Appeals for the Second Circuit created a rule in 1930 about how the IRS should move forward in those types of cases in its decision in Cohan v. Commissioner, 39 F.2d 540 (1930). In the case, George M. Cohan, a Broadway actor, claimed business deductions without documentation. He claimed that he didn’t have enough time to document all of his entertainment and travel expenses that he deducted on his income tax return. The IRS tried to disallow all of his deductions, but the court found that it was clear that he had incurred some expenses even if the exact amounts could not be substantiated. The court then outlined the Cohan rule through which taxpayers without receipts can still claim reasonable and credible expenses.

If you don’t have receipts, you will not be allowed to claim all of your expenses, however. Instead, the IRS will only allow you to deduct the minimum standard amount for the service or item based on its calculations. The U.S. Tax Court has limited the use of the Cohan rule in several decisions and has stated that taxpayers should supply information to support their expenses.

 

 

What Happens After The Audit?

After your audit, one of the following three things will occur:

  • Your audit ends with no changes if the IRS substantiates your return.
  • You agree to the IRS’s proposed changes and pay what you owe or set up an installment agreement.
  • You disagree with the IRS’s proposed changes and either appeal the decision or ask for a conference with a manager at the IRS.

Unless the IRS determines that you engaged in tax evasion or tax fraud, you don’t need to worry about going to jail. In most cases, you might owe some taxes and have to pay them.

 

 

Find an Accountant for Your Small Business

If you have received a notice of an audit, you should talk to TMD Accounting about our small business accounting services. Call us today at 1-856-228-2205 to request a consultation.

How Far Back Can You Get Audited?

How Far Back Can You Get Audited?

Many small business owners find tax season to be stressful. Filing taxes can be even more stressful when you consider the potential of an audit. The Internal Revenue Service (IRS) announced in late 2020 that it planned to increase the percentage of small business audits by 50%. While your chances of being audited are still relatively low, it is still a good idea to ensure that your books are in order to reduce your risks in case you are selected. Here is some information from TMD Accounting about how far back the IRS can go if it decides to audit your business.

 

 

How Far Back Can The IRS Audit You?

The general statute of limitations for an IRS audit is three years under 26 U.S. Code § 6501, which means that the IRS can audit your tax returns for the most recent three years. However, there are multiple exceptions to this general rule. For example, if an auditor determines that you have made substantial errors on your returns, they can add more years to the scope of the audit. According to the IRS, it will generally not go back more than six years unless the agency suspects that you might have committed fraud or have failed to file your required tax returns.

 

 

Statute of Limitations on IRS Tax Audits

As previously noted, the IRS generally has a three-year statute of limitations for tax audits from the date you file your return or the date that it is due, whichever is later. For example, if you file your tax return early, the statute of limitations will run from the due date rather than your filing date.

If you substantially understated your income, the statute of limitations for an audit is six years. A substantial understatement of income occurs when you omit 25% or more of your income. If you failed to file a tax return, the IRS will not have a statute of limitations to audit you since the time period will not start running until a return is filed. Similarly, if you filed a fraudulent return, the IRS can go back and audit it regardless of how long ago it was.

 

 

What Triggers an Audit?

In a majority of cases, the IRS chooses returns to audit randomly. However, the following red flags can increase the likelihood that you will be audited:

  • Failing to report all income
  • Being a high-income earner
  • Claiming a large charitable deduction
  • Making calculation errors
  • Claiming excessive deductions
  • Filing schedule C as a self-employed taxpayer
  • Claiming the home office deduction
  • Claiming deductions for business travel, meals, and entertainment
  • Claiming that a hobby is a business
  • Claiming you used a personal vehicle 100% for your business
  • Claiming the Earned Income Tax Credit (EITC)

The IRS distinguishes between businesses and hobbies by using a standard for profitability. If your business was profitable for three out of the past five years, the IRS will likely consider it to be legitimate. If your business claimed losses for three of those years, the IRS might consider your business a hobby and select you for an audit.

 

 

Tips For Avoiding Tax Audits

Here are some tips for avoiding a tax audit.

  1. Avoid Reporting Net Annual Losses

Reporting small net annual losses for your business can trigger an audit. While you have to report all of your income, you are not required to report all of your expenses. It might be a good idea to leave some of your expenses out if doing so will allow you to report a small net profit.

  1. Specify Your Expenses

As much as possible, avoid categorizing your expenses under “other expenses” on your return. Instead, explicitly list each expense by itemizing them.

  1. Provide Additional Detail as Needed

If you had a major drop or increase in a category of expenses, you should attach additional paperwork to your return to explain what happened in detail. This might help to answer questions an IRS agent might have about the sudden changes if your return is triggered.

  1. File Your Returns on Time

Filing your returns and paying your taxes on time shows a history of compliance. This might help to avoid a potential audit. You should also try to avoid amending your returns to help establish your history of compliance.

  1. Double-check Your Paperwork and Math

Make sure that the numbers on your forms match what you report on your return. You should also double-check your calculations to ensure that you have not made any math errors. The numbers you use for deductions should also vary from year to year. Don’t claim the same numbers for your deductions from year to year.

  1. Avoid Claiming Excessive Deductions

Don’t claim excessive deductions by overestimating your donations, meals, travel, or home office expenses. If you claim excessive amounts on your deductions, your return could be triggered for an audit. Similarly, claiming many deductions you haven’t claimed before can also make it likelier that your business return will be audited.

  1. Don’t Leave Blanks On Your Tax Form

You should answer every question on your tax form, including those for which your answer is $0. Leaving blanks could result in an oversight that triggers an audit.

 

 

How Do I Find an Accountant for My Small Business?

Working with a qualified accountant to prepare your business tax returns can reduce your chances of being audited since your returns should be fully accurate. While there will still be a chance that the IRS will select your business’s tax returns for an audit, having the help of the small business accounting services at TMD Accounting can help you to achieve a better outcome if you are audited. Call us today for a consultation at 1-856-228-2205.

 

Ultimate Guide to Car Tax Deductions and Mileage

Ultimate Guide to Car Tax Deductions and Mileage

If you use your vehicle for business purposes as a part of conducting your small business, you can claim vehicle-related tax deductions. While you might not give tax filing season much thought throughout the year, you can reduce your business’s tax liability and maximize the deductions you can claim by keeping accurate records year-round. Keeping records about your business’s use of your vehicle can help you potentially save hundreds of dollars through the mileage tax deduction. Here is some information about the mileage tax deduction, how to track mileage, and whether you might qualify to claim it.

 

What Is the Mileage Tax Deduction? How Does It Work?

The mileage tax deduction is a deduction that can be claimed on your tax return as long as you use your vehicle for business purposes and meet certain conditions. You can deduct your mileage if you drive your vehicle for qualified business purposes.

The Internal Revenue Service (IRS) sets the standard rate each year. In 2022, the mileage rate is $0.58 per mile. You calculate the deduction by multiplying the rate by the qualified miles you drove for business purposes. You can also choose to use your actual expenses instead of keeping logs of your mileage. We’ll discuss this more below.

 

Who Can Deduct Car Expenses?

You do not have to use your vehicle all of the time for your business to claim the mileage tax deduction. You can claim the deduction for trips you take to purchase supplies for your home office and other similar trips even if you primarily work from home. However, commuting to and from your home and a separate office does not count, and you can’t claim those miles. If you work from a home office, you can count the mileage between your home and any work-related errands or meetings.

 

Which Car Expenses Can You Write Off?

There are expenses you can deduct only when you use the actual expense method and some that you can deduct with either method. If you use the actual expense method, it will replace the mileage deduction you would claim if you used the standard mileage method. You can write off the following expenses with the actual expense method:

  • Fuel
  • Vehicle lease payments
  • Auto insurance
  • Vehicle maintenance costs
  • Depreciation

You can also write off the following expenses under either the standard mileage or the actual expense method:

  • Tolls
  • Fees from the Department of Motor Vehicles
  • Parking
  • Car washes

If you use the actual expense method, you will have to calculate the percentage that you used your car for business purposes. Estimate how much of your mileage on your vehicle is used for business purposes instead of commuting or personal tasks. You don’t have to be exact and can guesstimate.

 

How to Write Off Car Expenses: Actual Method vs Mileage Method

You can either use the standard mileage or the actual expense method. To use the standard mileage method, you can keep a vehicle mileage log in your vehicle or on your smartphone. With this method, track every mile you drive for business purposes and multiply the total by the standard IRS mileage rate.

With the actual expense record, you won’t have to track every mile you drive. You will instead just determine the business-use percentage of your vehicle and your vehicle-related expenses and write off the percentage you can allocate to your business use.

The actual expense method is simpler for most people since they don’t have to keep logs of their mileage. In most cases, the actual expense method will also result in a larger deduction. However, if the following situations apply to you, the standard mileage method might be a better option:

  • You drive more than 30,000 miles per year for work
  • You have a gas-efficient, older vehicle and won’t benefit from depreciation
  • You have an electric vehicle and do not have gasoline expenses

Even if you do have an electric car, you might still benefit from the actual expense method if your vehicle is fairly new since electric vehicles are generally expensive to purchase.

 

Find an Accountant for My Small Business

Calculating the mileage tax deduction can be complicated whether you are using the standard mileage method or the actual expense method. In addition to the mileage tax deduction, there are also other deductions you might be eligible to claim for your business. The small business accounting services from TMD Accounting can help you to reduce your tax liability while maximizing your deductions. Contact us for an appointment today by calling us at 1-856-228-2205.

What Information Does My Accountant Need To Prepare My Business Tax Return?

What Information Does My Accountant Need To Prepare My Business Tax Return?

As a small business owner, knowing what you need to gather to file your business tax returns can seem difficult. Keeping accurate records throughout the year can go a long way to helping your business at tax time. If you are a new small business owner, filing taxes for your business for the first time can be overwhelming. Changes in the state and federal tax laws can also make tax filing even more daunting for business owners who wait until the last minute to pay taxes and then have to scramble to gather all of their receipts, calculate business income and profit and loss statements, and figure out the transactions your business has conducted during the past year. Here is some information from our accounting professionals here at TMD Accounting about tax filing for small businesses and the documents your accountant will need.

 

Why You Should Work With an Accountant

Many small business owners don’t have a good understanding of business taxes and finances, making it likelier that they will make mistakes when they file their business tax returns. You might also miss some business tax deductions that could reduce the amount your business might have to pay. It will likely be in your interests to retain an accountant to help with your business taxes. An accountant can help you identify the documents and information you will need to file your return and pay your taxes so that you can focus your attention on your business’s day-to-day operations.

Working with an accountant will cost less if you gather as much information as you can before you meet with the accounting firm. Since businesses differ from each other, so will the information that you might need to bring with you to your accountant’s office. However, some general information your accountant will need includes information about your business’s profits and losses, gross income, records of goods your business sold, client invoices, sales records, salaries, receipts, and your business’s tax return from last year if applicable. While you can try to file your business taxes yourself, your business might end up paying significantly more than you should if you instead work with an accountant who can identify credits and deductions that your business can claim.

 

Tax Filing Dates For Businesses

Businesses have different tax filing deadlines based on how their businesses are structured. They also have to pay different taxes and file different forms based on their business entity whether their business is structured as a limited liability company, sole proprietorship, S corporation, partnership, or C corporation.

You might need to pay the following five types of taxes for small business owners:

  • Self-employment tax
  • Employment tax
  • Excise tax
  • Estimated tax
  • Income tax

Once you have calculated your earnings, deductions, and credits, the following forms and dates apply to the different business structures:

  • Sole proprietorship or single-member LLC- Report business profits and losses on Schedule C filed with the business owner’s personal income tax return on April 15 of each year
  • Multi-member LLC- Use Form 1065 and Schedule K-1 for each member and file by March 15 each year
  • Partnership – Form 1065 and Schedule K-1 for each partner due either on March 15 or on the 15th of the third month following the end of the business’s tax year
  • C corporation – Form 1120 due on April 15 or four months following the end of the corporation’s tax year
  • S corporation – Form 1120 S and Schedule K-1 for all shareholders due by March 15 or three months following the end of the company’s tax year
  • Self-employed – Form 1040-ES each quarter to pay quarterly taxes

 

What Documents Do I Need to File Business Taxes?

Instead of waiting until the last minute and feeling stressed out, you should gather the documents your accountant will need well in advance. With some basic organization and preparation, you can make filing your business taxes less of a hassle. Gather the following documents for your accountant:

  • Identification information – Social Security number and identification card (driver’s license, state-issued ID, military ID, green card, passport, or etc.)
  • Past year’s tax return if applicable
  • Profit and loss statements
  • Gross receipts from services or sales
  • Accounts receivable if using the accrual accounting method
  • 1099-INT for business accounts or business bank statements
  • Information about business assets
  • Receipts
  • Beginning and ending inventory amounts
  • Inventory purchases
  • Advertising expenses
  • Phone, computer, and internet expenses
  • Travel expenses for business travel, including mileage logs and maintenance records for business use of a vehicle locally and airfare and hotel expenses for travel out of the area
  • Contract labor expenses for amounts paid to subcontractors
  • Fees and commissions
  • Business insurance
  • Office lease expenses
  • 1098-T to calculate home office deduction
  • Payroll expenses
  • Employee benefits paid for employees
  • Estimated taxes paid

 

Additional Tips About Filing Taxes

If you work with your accountant throughout the year, filing your business taxes will be much easier. You can send your accountant your business’s bookkeeping records for reconciliation throughout the year so that you will have a better idea of where your business’s finances stand. Your accountant can also advise you about the types of records to keep and ways you can claim deductions you might not be aware of. The key is to keep accurate records, save receipts, and keep your business’s financial records organized.

 

Get Help From an Accountant for Your Small Business

When you are trying to run your business, thinking about filing business taxes might seem overwhelming. TMD Accounting’s small business accounting services can help your business to file accurate and on-time business tax returns. To learn more, contact us today at 1-856-228-2205.

Can I Claim Medical Expenses on My Taxes?

Can I Claim Medical Expenses on My Taxes?

Medical bills can balloon when you have medical emergencies that your insurance does not fully cover. Fortunately, you may obtain some relief by deducting a portion of these expenses on your tax return under the Internal Revenue Code. In order to take advantage of this deduction, it is important that you understand what is considered to be a medical expense and how to correctly claim the deduction.

Value of the medical expense deduction

Under the IRS rules, taxpayers are able to deduct the qualified medical expenses exceeding 10 percent of their adjusted gross incomes for the tax year. Your AGI is your taxable income minus such adjustments as your student loan interest, IRA contributions and your deductions. Only the portion of your medical expenses that exceed 10 percent of your AGI may be deducted.

Which medical expenses are deductible?

Only qualified medical costs are deductible. These include vision care, dental care, surgeries, treatment and preventative care. You are also allowed to deduct the costs associated with psychiatric and psychological care. You are allowed to deduct the costs of prescription medications and prostheses such as hearing aids, contact lens, glasses and false teeth. Finally, if you keep good records, you can deduct the costs of traveling for medical care, including parking fees, bus fares and vehicle mileage.

What’s not deductible?

You may not deduct any of your medical expenses for which you receive reimbursements, including from your employer or your insurance company. The IRS generally does not allow you to deduct the expenses that you incur for cosmetic procedures, non-prescription drugs or general health care products such as toothpaste or over-the-counter diet products.

Claiming the medical expenses deduction

You must itemize your deductions on your tax return to claim the deduction for medical expenses. This means that you will not take the standard deduction. You should only choose to take the medical expense deduction if the total of your itemized deductions will exceed your standard deduction. Deductions are itemized on Schedule A of your IRS Form 1040.

You will report your total medical expenses that you paid during the tax year on line one of Schedule A. Next, you will enter your AGI on line two and 10 percent of it on line three. Finally, you will enter the difference between your medical expenses and 10 percent of your AGI on line four. This amount will then be used to reduce your taxable income.

Contact us today

To learn more about the medical expense deduction and other deductions that might be available to you, contact Tom DiTullio Accounting. We are experienced local tax preparers who can advise you about the different deductions that might be appropriate for you.

Who Can Claim Head Of Household?

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.

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

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

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

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 “2nd 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 2nd 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.

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

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

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.

Quick Guide to the Child and Dependent Care Tax Credit

Quick Guide to the Child and Dependent Care Tax Credit

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. 
1 2 3 4