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February 2019

Surprising Tax Breaks You Should Know About

We’re in the middle of tax season, and the due date to file our income tax is getting closer and closer. If we haven’t been able to do so, there is still some time left to do our research. This way, we might find some surprising tax breaks that you should know about before actually filing your taxes. After all, who wouldn’t appreciate having to pay little bit less on taxes. 

We have talked about different tax deductions before. However, here you will find some surprising tax breaks you may haven’t heard of before. These include charity work expenses, gambling losses, jury duty pay, and guard dog expenses.  

Charity Work Expenses 

Charitable donations are quite common among taxpayers who are looking to get a tax deduction while helping others. However, others like to volunteer and work at different charity organizations instead. If we drive to the location of the organization, the costs generated by parking, toll fees, and even gas (14 cents per mile) can be deducted. Also, if we bought any supplies for such organizations, including food or kitchen utensils, for example, those expenses are deductible, too. If your deduction is more than $250, we might need documentation from the charitable organization.  

Gambling Losses 

Many of us are not that lucky when it comes to gambling and betting. Thus, losing money during a trip to Las Vegas or Atlantic City feels more possible than winning. If we ended up coming back home almost penniless, there might still be a bright side. We can deduct these losses if we go for an itemized deduction. Qualifying losses from casinos, racetracks, bingo, lottery, even raffle tickets count. However, we can’t deduct an amount that exceed any winnings we claim as income.  

Jury Duty Paycheck 

Being summoned for jury service is quite an important civic duty that almost 15% of American adults get to fulfill every year. Having to report for jury duty means days off work, even when the court may pay for your time and services. If your employer offers regular pay or paid leave and receive jury duty pay, this money counts as taxable income. If your employer requires you to hand over any jury duty pay, such pay would still count as taxable income. However, you can claim jury duty pay as a deduction, which would then result in a zero-net gain.  

Guard Dog Expenses 

It is no surprise that some business expenses can be deducted from our federal tax report, such as home office and transportation, However, one of the most surprising tax breaks comes with guard dog expenses. If we use a dog to guard the premises of our business, and it is a certified guard dog, its expenses can be deducted. Costs of food, medical attention, training, etcetera, can qualify for such deduction. Keep in mind it should be of a traditional guard dog breed like Rottweilers and German Shepherds.  

Common Tax Problems and How to Solve Them

For the majority of taxpayers, having to deal with the IRS can only mean that they are in trouble. Even when it sounds worse than it is, there are some very common tax problems that we might have to deal with if we’re not careful. However, having a tax professional on our side is the best way to solve these problems. If you are going through any of this, get in touch with us and we’ll go over your situation.  

One of the most common tax problems is having past-due tax returns that we haven’t filed yet. Being unable to pay the backtaxes and penalties we might have accrued is quite common, too. In more serious cases, the IRS might levy our bank account. Also, having an IRS officer wanting to meet with us can only mean we are in trouble. Nevertheless, remember that all these situations can be easily solved if we work with the right tax professional.  

Past-Due Tax Returns 

One of the most common tax problems we might be facing is having past-due tax returns. Everyone’s situation can be different, and whether you forgot to file, or just didn’t have the time, this has to be addressed as soon as possible. Since we are subject to penalties and interests, acting urgently is quite important. Once we file our past-due returns, looking for a payment plan is the next step. In order to get a payment plan that works for you, get together with your tax consultant and have them work something out.  

Backtaxes and Penalties that Can’t Be Paid 

If we failed to submit our tax return for any number of years, chances are we accrued penalties and interests. This can also be the case if we filed our tax return after the IRS due date. Being able to pay back the penalties, interests, and any owed taxes can be difficult. One way to solve this problem is requesting an Offer in Compromise from the IRS. After they evaluate our financial situation, we might be placed in a Currently Not Collectible status.  

Levied Bank Account 

In some cases, the IRS might levy our bank account in order to collect a balance we might owe them. This means that they either placed a hold or a freeze on our account as an attempt to collect a debt. If this is the case, we will receive a notice by the IRS so we can be aware of the situation. In order to get rid of this levy, we will have to pay off any outstanding balance we might have. However, if we can’t cover such debt, we could request a payment plan. We might also submit a financial hardship waiver, and avoid a bank account levy.  

IRS Officer Wanting to Meet 

One of the least common tax problems, though, is having an IRS officer wanting to meet with us. When they come to our home or workplace, it means that we have become a priority for the IRS. Thus, we should not hesitate and finding a professional tax consultant to help us is a must. If the IRS officer gets to contact us, just take their contact information. A tax advisor should take care of the matter for you. This in order to make sure an arrangement can be made.  

Are You Required to File an Income Tax Return?

We are in the middle of tax season, and while some have already taken care of it, some might still be wondering if they are required to file an income tax return. Now, we need to be aware of the consequences that might come if we fail to file our income tax return. Also, we must figure out whether we are required to do so or not, and what it depends on. This way, we can take advantage of the time we have left to submit such report and avoid any penalty.  

There are three main aspects that will determine whether we are required to file an income tax return or not. Such include our gross income and our filing status, as well as our age. Another reason why you would want to file your taxes is if you want to claim a tax refund. Remember to consult with a professional tax preparer to consult your particular situation.  

Gross Income and Filing Status 

One of the main aspects that determine if we are required to file an income tax return is your annual income and your filing status. There are different income thresholds we should go over, which vary per status. To begin with, if we are to file as a single person, our income threshold is $12,000. If we made less than that throughout the year, we are not required to file an income tax return. This is because, for the tax year 2018, the standard deduction for single tax payers is for that amount.  

The threshold for taxpayers who are married filing jointly is $24,000, and $5 for married taxpayers filing separately. If we are filing our taxes as a head of household, the threshold then goes down to $18,000. For those who decide to file their taxes as qualifying widow or widower with dependent child, the threshold goes up again to $24,000.  

Income of Taxpayers 65 or older 

Another aspect that will help us determine if we are required to file an income tax report is our age. If we turned 65 during 2018, our threshold will also change depending on our filing status. For example, single taxpayers 65 or older have an income threshold of $13,000. If we go for married filing jointly, we will qualify for one of two different thresholds. If only one spouse is 65 or older, the threshold is $25,300, but if both are 65 or older, it goes to $26,000. 

The head of household status also depends on age, allowing for a threshold of $19,600 if we’re 65 or older. Besides, a threshold of $25,300 applies for those who file as qualifying widow or widower with dependent child.  

Claim a Tax Refund 

There are some taxpayers who may not be required to file an income tax return but might want to. If your employer withheld federal taxes for your paycheck, you might qualify for a refund. For example, if your annual income was less than the $12,000 standard deduction, you are eligible for a tax refund. This means that, if your employer withheld $500 of federal taxes, you are entitled to receive that money back. In order to be able to receive such a refund, you are required to file an income tax return, regardless of your income. This is because the IRS won’t automatically issue any refunds, and needs to receive the corresponding tax report.  

If you worked as a freelancer or self-employed during 2018, you might want to read this article instead.

Tax Tips for Homeowners to Keep in Mind this Season

Being a homeowner comes with many benefits and a rewarding feeling of achievement and security for us and our family. There are also many responsibilities that come from buying our own house, including paying our corresponding taxes. However, we might be able to qualify for several deductions and credits, which is why we decided to share four useful tax tips for homeowners that you should keep in mind during this tax season.  

One of the most useful tax tips for homeowners includes deducting our moving expenses. If we suffered from casualty losses, we might be able to deduct some expenses, too. Deducting our mortgage interests and mortgage taxes is another great tip. And for those freelancers who use their home as their office, some expenses could be deducted, too.  

Moving Expenses 

Moving to a new location tends to come with many expenses that we must consider beforehand. In addition, the hassle of actually moving our belongings, packing, unpacking, arranging, and rearranging isn’t nobody’s favorite. Luckily for us, though, some moving expenses are deductible on our income tax return. There are, of course, some requirements we must meet in order to be eligible for this deduction. There must be a certain distance from our current workplace to our previous house and the new one to qualify. Having worked full-time for at least 39 weeks of the year is another requirement.  

Casualty Losses 

As homeowners, taking care of our property is one of the most important priorities. Making sure it is in good shape is a must. However, unforeseen events can happen, and sometimes these events end up causing great damage to our houses. If we were victims of vandalism or a natural disaster, for example, we might be able to deduct some losses. However, the IRS defines a casualty as an unusual, unexpected, or sudden event.  

Mortgage Interests 

Being able to deduct our mortgage interests is one of those tax tips for homeowners that we should keep in mind if eligible. Even when the Tax Cuts and Jobs Act modified the deduction, we are still able to benefit from it. We can deduct the interest of any residence loan that goes up to $750,000 if we obtained this loan after 2017. For loans obtained before that year, the limit of the loan goes up to $1,000,000. Also, we should remember this can apply for our first and second mortgage, in case we have more than one.  

Home Office 

Last but not least, there is another great deduction that some of us could take advantage of if we work from home. If we are starting or running our own business, using a part of our house to do so will save time and money. Also, the expenses and costs that our house generate as a result of business activity can be deductible. However, we must be self-employed to enjoy this benefit. Because of the TCJA, employees of an established company can’t deduct home office expenses.