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September 2018

Charitable Contribution Deductions: How Donations Count on Your Tax Return 

As the popular saying goes, it is always better to give than receive. When we make donations to charitable organizations, we never expect anything in return. However, charitable contribution deductions can apply towards your income tax return every year. There are several aspects to take into consideration, though, in order for our donations to be valid.

First, we need to know what kind of organizations will count for charitable contribution deductions. Then, we need to understand the ISR requirements for donations and tax return deductions. We also need to be aware of how much can be reflected on our tax return from charitable contribution deductions.

What Organizations Count for Charitable Contribution Deductions?

Americans give 2% of our income as donations to charitable and non-profit organizations every year. However, when it comes to charitable contribution deductions, we must pay attention to which organization we decide to donate. Since charitable organizations need to register through the IRS, not all charities and non-profits will count against your tax return.

According to Charity Navigator, donations to individuals, foreign governments, foreign charities, and even some private foundations do not count against your tax return. Some examples of organizations that do qualify, however, include religious organizations, war veterans’ organizations, volunteer firefighters, and civil defense organizations.

Are There Any Tax Requirements for Charitable Contribution Deductions?

The first requirement we need to consider is that we must file for itemized deduction in order to qualify for charitable contribution deductions. If we file a standard deduction, then our charitable donations won’t count against our tax return. This means that we will have to list all of our deductions, including items such as mortgage, state, and local tax, medical expenses, along with charitable donations.

Before we start filing our tax return, we should take care of some other procedural aspects. Even before making a donation, we must make sure the organization is a 501(c)(3) private foundation or public charity. In addition, we must keep a record of each and every contribution we’ve made to the organization, so keep the tax receipts they give you. If we made a non-cash donation, we will need a qualified appraisal of the property value.

How Much Will Be Reflected as Charitable Contribution Deductions?

Before talking about how much could be reflected as charitable contribution deductions, we must be aware that there are different amounts of yearly donations to be met. Such minimum amounts will depend on how we are deciding to file our tax return. If we are filing as a single person, or married but filing separately, we should have donated at least $12,000. Filing as head of household, the amount will go up to $18,000. If we decide to file jointly as married, then the amount will go up to $24,000.

Now, depending on our income and tax bracket is the amount of charitable contribution deductions we would be likely to receive. For 2018, the tax brackets remained with a number of seven different tax rates. These tax rates were 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Such brackets will depend on our total income plus the way we are filing our taxes, whether as a single person, a married couple, or head of household. In this case, if someone who belongs to the bracket of 37% made a $20,000 donation, they would see $7,400 reflected as charitable contribution deductions.

 

Freelancer Taxes: What You Need to Know 

Working as a freelancer might be the dream of many of us. Being your own boss, deciding when, where, and how much you work sounds enticing. Deciding on how much or how little you charge for your work is another advantage, too. However, this professional path also has its downsides. One of them is having to pay freelancer taxes.

When you work as an employee, your employer takes care of almost everything. When we work on our own, the responsibility falls upon ourselves. This is why we bring you a short list of different aspects to consider regarding freelancer taxes. From your quarterly payments to home office and professional help, we hope these tips will be helpful for you.

Pay Your Freelancer Taxes Every Quarter

One of the most important aspects freelancers need to know is that you have to pay your taxes every quarter. Since you don’t have an employer to make these payments, you must submit your Quarterly Estimated Tax payment to the IRS every three months. The due dates may vary a little every year, but for the current tax year, the dates are the following:

  • April 17, 2018
  • June 15, 2018
  • September 17, 2018
  • January 15, 2019

You should keep a portion of your payments apart so you’re able to cover this payment. Most tax advisers recommend saving anywhere from 25% to 30% of your payments to cover the quarterly freelancer tax. Employers tend to cover somewhere around half of your corresponding tax payment. Since you are your employer, you have to pay for the whole amount.

Home Office and Other Expenses

When it comes down to the yearly tax return, it might be harder for freelancers to keep an accurate and well-documented record of income and expenses. This can sound obvious to some, but we can highlight enough the importance of keeping track of each and every payment we receive. We should also document every expense that is business related. From meals and transportation to stationary and any other equipment you need.

Home office expenses are also deductible, so keep that in mind. In order for the home office tax deductible to be approved though, there is some consideration to have. First, the area should be used as an actual home office. This is a part of your house where you run your business exclusively. Having a clear division between home and office is crucial. If you use a room of your house partially for home office, you should calculate the percentage of business use and personal use.

Hiring a Professional Always Helps

There are many other tips and tricks regarding freelancer taxes that are worth learning. So, we always recommend hiring a professional accountant or tax advisor. This can be especially useful for those who just began their freelancer career. Being aware and knowledgeable of current state requirements and regulations is an essential part of freelancer taxes.

Being your own payroll department might be simple for some. We shouldn’t underestimate the real value a professional consultant can bring. Besides, learning how to take advantage of freelancer taxes returns will be beneficial, not only for your pocket but your business too.

 

Tax Prep Pricing: How Much Should I Pay for Tax Preparation Services? 

Preparing and filing our tax return can be a hassle. Especially when we don’t have a complete record of our expenses. This can also seem like a quite complex process if we’re doing it for the first time. That’s why almost 50% of us decide to hire an accountant and have them do the job for us. However, knowing how much to pay for tax preparation services might get tricky sometimes.

There are several aspects to consider before we decide to hire a professional accountant to do our tax prep for us. Also, there are many factors that can influence the rates that the accountant decides to assess. In order to understand how much to pay for tax preparation services without it being too much, we will look at 3 different concepts. First, we’ll look at average pricing for tax prep reports. Then we’ll take a deeper look into how exactly tax prep services are charged. Lastly, we’ll go over alternatives to hiring a tax prep pro.

What Is the Average Pricing for Tax Preparation Services?

It is not difficult to find the average costs of tax preparation services online. All it takes is a simple Google search and then checking a couple of websites to make sure the numbers match. Both Thervo.com and thebalance.com show reports from the National Society of Accountants. These reports state that the average price for submitting an itemized Form 1040 with Schedule A is $273, and if you don’t itemize it, it can go down to $176. Also, if you need an itemized Form 1040 with Schedule C, the price can go up to $457. You can consult the NSA website directly for average prices of other forms.

How Are Tax Preparation Services Charged?

More often than not, prices for tax preparation will vary, depending on each person’s situation and record. Most of the accountants will charge a fee for each form or schedule that needs to be filed. If you have worked with the same accountant before, they might charge the same fee than last year’s, plus an additional fee for any changes. Some prefer to go for a minimum tax return fee plus an additional one, depending on the client situation’s complexity. It is not uncommon, though, to be charged on an hourly rate, or even by setting a fee for each item of data entry.

What Are Alternatives to Getting a Tax Professional?

Last week we talked about Cloud Accounting and how you might benefit from them. We bring this up because hiring a professional to help you with your tax return might not be 100% necessary for some. Getting online tax preparation services might be a better idea for some, especially for individuals who already have experience in the matter and have a clean, organized record. There might be other apps and websites like Credit Karma Tax or Wave, that allow you to keep track of your finances, not only during the tax report season but throughout the year, too.

 

Cloud Accounting for Small Businesses: What Is it? 

Technology keeps becoming more and more important in our everyday lives. The world of businesses keeps adopting ways to include it, too. After all, technology means growth, development; the future is technological. Cloud accounting is part of such technological growth. For years, accounting and bookkeeping, especially for small businesses, turns out to be a burden. This is why tax consultants and financial advise companies started to provide this service. However, with the development of accounting software, the need for professional accountants might not be as compulsory as it used to.

Originally, accounting software used to work on your company’s computer. Having to purchase, install, and master a new program resulted in having to spend money, time, storage, and effort. Cloud accounting solves most of these problems. In order to gain a full understanding, we need to analyze certain aspects beforehand. Here we will discuss what cloud accounting is, how it works, and how safe it really is.

What Is Cloud Accounting

Cloud accounting, or to be precise, cloud computing accounting software, is a type of software that assists businesses with their accounting and bookkeeping duties. The main difference between cloud accounting and regular accounting software is that the first stores its apps and clients’ information in the cloud. This means that instead of having to install a given program on your computer, everything is done online.

This can bring several benefits, especially to small business owners. Professionals consider cloud accounting quite cost-effective, as well as efficient in terms of time and storage. Cloud accounting can work as an alternative to hiring a particular accountant or bookkeeper, too.

How Does Cloud Accounting Work?

The way cloud accounting works can be quite similar to the way regular accounting software does. When we hire a cloud accounting firm or provider, we will have access to their network. This way we are able to upload the accounting information that needs to be analyzed. Instead of having to store all this data on our company’s computer, we can safely store it in the cloud. Then, all we need to access such information is a device with an internet connection.

Cloud accounting is one of the most cost-effective ways to do bookkeeping. Besides, many small, medium, and even large businesses are beginning to adopt such accounting services more and more. It also enhances information accessibility, and it keeps it safely stored, too.

How Safe Is Cloud Accounting

Despite the many threats that online services and internet connectivity have brought, cloud accounting has proven to be a safe option. To begin with, when we store sensitive financial information in portable devices like laptops, tablets, and even USB drives, such information becomes vulnerable. As anybody could lose or steal these devices, we don’t recommend storing sensitive information in them. With cloud storage, we know such cases are not possible. Besides, it provides additional back up of our data, which could be useful in case of an unfortunate event.

Just like any other online service provider such as online banking, security measures are taken with utmost care. State-of-the-art technology is used in order to keep sensitive financial information safe. Site encryption and multi-factor authentication are part of the online security measures that cloud computer accounting software providers implement along many other information security policies.

We must remind you that even when cloud accounting might be a solution that fits your business needs, having a professional accountant as part of your team is always recommended. That’s until computers end up permanently and efficiently replacing us if they do at all.