We recently spoke with Erik Sherman of the National Association of Realtors to discuss the biggest homeowner tax mistakes. Below is an except from the article.
6 Homeowner Tax Mistakes Accountants Say to Watch For
4. Understanding Rental Income
I’m a staff accountant for an S Corporation. We need to issue 1099 forms to LLCs and contractors. As an S Corporation, do we need to issue a 1099 for goods and supplies?
The tax deadline that is coming up in four months is also an important date for health savings account (HSA) contributions. Similar to an IRA, you have the option of electing whether or not you want to apply the contributions to the 2015 or 2016 tax year. Find out the best ways to use your health savings account by reading about HSA contribution limit.
You can contribute up to $3,350 for individual health insurance coverage and $6,650 for family coverage and an additional $1,000 if you’re 55 years or older. To contribute to a health savings account, you must have a high-deductible health insurance plan of at least $1,300 for individual coverage and $2,000 for a family plan.
Those fortunate enough to be named a beneficiary of a retirement account will want to know the nuances for reporting income on their tax return. This is specifically important when the account holder passes away before or after the time they are supposed to take required minimum distributions (RMDs).
Traditional IRA and 401(K) account holders are required to start taking minimum distributions when they reach the age of 70 ½, even if they are still working for an employer at the time. However, in the first year they are required to take distributions, they can defer it until April 1st of the following year.
Freyman CPA was featured in Crain’s New York discussing how our firm utilizes technology when working with clients. The article entitled, “The New Accounting Firm,” specifically highlights Freyman CPA as well as some of the larger firms such as PwC, EisnerAmper, WeiserMazars & others. As you may be aware, we have grown our business substantially over the past year as a result of our commitment to technology and to deploying the right resources to better serve our clients.
While the cost of health insurance continues to rise and employers have additional responsibilities in order to comply with the Affordable Care Act, there is still a tax benefit specifically for companies providing health insurance coverage. Specifically, employers may be eligible for the health insurance tax credit in 2015 for 50% of the cost of premiums contributed by a small business.
Itemizing deductions in itself does not increase the chances of being audited. If we reference the latest IRS statistics, the taxpayer’s income is more of a factor than whether or not they itemized. Specifically:
That being said, if the taxpayer has significant itemized miscellaneous expenses in relation to their income, then that can certainly raise a red flag.
In July 2015, the Senate Finance Committee voted 23 to 3 to extend bonus depreciation and the enhanced section 179 deduction through 2016. The full Senate has not indicated if or when it will act on this legislation and the House is not scheduled to take up extenders until the fall. Most practitioners expect it to be reinstated, but time will tell. How should you prepare?
The obvious answer is that if your itemized expenses exceed the standard deduction, you should itemize. That being said, if you don’t have the actual receipts and supporting documentation to justify claiming those expenses, then you run the risk of losing those deductions as a result of an audit, which can be costly from an interest and penalties perspective. Not to mention, you’ll likely need to hire a tax professional to assist you with IRS correspondences.
Many existing or soon to be retirees should pay careful attention to the tax breaks that are available to them. As most of us know, when you’re on a fixed budget, every dollar counts. So, what are some of the tax breaks for retirees?
This can be overlooked as many elderly taxpayers may think there’s no chance of deducting these medical expenses. That’s not always true. We’ve seen countless examples of those on dialysis being prescribed specific supplements & vitamins by their doctor that goes beyond just caring for their general health. With the proper support, in those instances, the costs which can be in the several thousand dollar range and possibly greater are eligible deductions. Specifically, if we reference IRS Publication 502 page 16 — it states, “You cannot include in medical expenses the cost of nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. unless they are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician. Otherwise, these items are taken to maintain your ordinary good health, and are not for medical care.”