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Tax Tip of the Week | No. 370 | IRS Warns of New Scam – The Federal Student Tax August 31, 2016

Posted by bradstreetblogger in : General, tax changes, Tax Planning Tips, Tax Tip, Taxes , add a comment

Tax Tip of the Week | August 31, 2016 | No. 370 | IRS Warns of New Scam – The Federal Student Tax

The Internal Revenue Service has issued a warning to taxpayers about bogus phone calls from IRS impersonators demanding payment for a non-existent tax, the “federal student tax.”

Even though the tax deadline has come and gone, scammers continue to use varied strategies to trick people, in this case students. In this newest twist, they try to convince people to wire money immediately to the scammer. If the victim does not fall quickly enough for this fake “federal student tax,” the scammer threatens to report the student to the police.

“These scams and schemes continue to evolve nationwide, and now they’re trying to trick students,” said IRS Commissioner, John Koskinen. “Taxpayers should remain vigilant and not fall prey to these aggressive calls demanding immediate payment of a tax supposedly owed.”

Scam artists frequently masquerade as being from the IRS, a tax company, and sometimes even a state revenue department. Many scammers use threats to intimidate and bully people into paying a tax bill. They may even threaten to arrest, deport, or revoke the driver’s license of their victim if they don’t get the money.

Some examples of the varied tactics seen this year are:

• Demanding immediate tax payment for taxes owed on an iTunes gift card.
• Soliciting Form W-2 information from payroll and human resource professionals.
• “Verifying” tax return information over the phone
• Pretending to be from the tax preparation industry

The IRS urges taxpayers to stay vigilant against these calls and to know the telltale signs of a scam demanding payment.

The IRS will never:

• Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed a bill.
• Threaten to immediately bring in local police or other law-enforcement groups to have a taxpayer arrested for not paying.
• Demand the taxpayer pay taxes without allowing them the opportunity to question or appeal the amount they say is owed.
• Require a taxpayer to use a specific payment method for taxes owed, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone.

Please pass these tips along to everyone you know. These scams just keep getting worse every day.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 369 | Tax Breaks for Small Business Owners August 24, 2016

Posted by bradstreetblogger in : General, tax changes, Tax Planning Tips, Tax Tip, Taxes , add a comment

Tax Tip of the Week | August 24, 2016 | No. 369 | Tax Breaks for Small Business Owners

Now that we are in the lazy days of summer, it is a good time to take a mid-year look at how you may be able to reduce your tax bill at the end of the year.

Here are six areas to consider:

1.     Load up on equipment:  Your business can potentially take a Section 179 deduction of up to $500,000 for qualified property placed in service in 2016, with a phase-out threshold at $2 million.  An alternative to writing off the full purchase price of the equipment is to use the 50% Bonus Deprecation option.  The point is, buy equipment when you need it and don’t wait for the year-end.

2.    Employ your child:  If you put your child on the payroll (in an age appropriate job), the wages are deductible just like any other employee.  Your child may have to pay taxes on the income they receive, but it will be at a much lower tax rate than you would probably pay.  In addition, with this earned income your child could invest in an IRA (a Roth IRA would probably be the best choice).

3.    Travel to a resort area: When you travel away on business, your travel expenses—including airfare, hotel and 50% of the cost of the meals—is deductible as long as the primary purpose of the trip is business related.

4.    Treat your business clients:  When you hold a “substantial business discussion” with a client, you can generally write off 50% of any costs of entertainment preceeding or following the meeting.   This may include a round of golf or night at the ballpark.  Be sure to keep meticulous records of the expenses and the purpose of the meeting.

5.    Pay your quarterly tax bill:  If you are self-employed you should be making quarterly estimated payments.  Take a look at your income and expenses so far this year.  You can then increase, or decrease, the next quarterly payment that is due September 15, 2016.

6.    Aim for target workers:  Your business can claim the Work Opportunity Tax Credit (WOTC) for hiring workers from one of several “target groups” (such as unemployed or disabled veterans).  This credit had originally ended at the end of 2014, but recent tax rule changes extended the WOTC through 2019.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 368 | Back-to-School Tax Tips August 17, 2016

Posted by bradstreetblogger in : Deductions, General, Tax Tip, Taxes , add a comment

Tax Tip of the Week | August 17, 2016 | No. 368 | Back-to-School Tax Tips

With the start of school just around the corner (or maybe already started), here is a reminder of the tax breaks and deductions available for qualified education expenses:

Private School Tuition and School Uniforms

The cost of private school or parochial school tuition is not deductible. However, the child care component costs of private school tuition for children under 13 may qualify the taxpayer for a tax credit. School uniforms are also not deductible, even if they are required.

Before and After School Care Can Be Deducted

For a child under the age of 13, the cost of before or after school care may qualify the taxpayer for a tax credit if it is a qualifying expense.

Tax Deductions for School Fundraisers are Limited

You are required to reduce your deduction by the market value of any goods or services received in return for your charitable donation.

Moving Expenses to Go to College are Not Deductible

Going away to college is not moving for a job and is not considered a moving expense deduction by the IRS. However, the expenses for moving from college for that first job may be eligible for the moving expenses deduction.

Earnings in 529 Plans are Not Federally Taxable

The earnings in 529 plans are not taxable. The money grows tax-free and withdrawals are not taxable as long as the money is used for eligible college expenses.

Use Tax-Deferred Accounts to Pay for Educational Expenses

You can use tax-deferred accounts (i.e., an Educational Savings Account) to pay for qualified educational expenses, including books and computers for elementary, high school and college expenses.

Student Loan Interest is Deductible Above the Line

Student loan interest is generally deductible as an “above the line” deduction, meaning you do not have to itemize in order to claim the deduction. There is a student loan interest deduction of up to $2,500 for paying interest on a student loan used for higher education. The amount of the student loan interest deduction is gradually reduced as the taxpayer’s modified adjusted gross income exceeds a certain range.

American Opportunity Tax Credit

The American Opportunity Tax Credit can amount to $2,500 in tax credits per eligible student and is available for the first four years of post-secondary education at a qualified education institution. Up to 40% of the credit is refundable, which means that the taxpayer may be able to receive up to $1,000, even if they have no tax liability. Eligible expenses include tuition at an eligible institution, books and required supplies, but not room and board, medical expenses, insurance, etc. Income limits apply. The taxpayer is now required to have the 1098-T from the qualified educational institution to take the AOTC, and the credit has to be based on amount paid and not billed.

Lifetime Learning Credit

Up to a maximum of $2,000 for the Lifetime Learning Credit is available for qualified education expenses paid for a student enrolled in an eligible educational institution. The credit is a nonrefundable credit of 20% of a maximum $10,000 in qualified education expenses. There is currently no limit on the number of years a taxpayer can claim the credit. Income limits apply. Please keep in mind, this credit does not allow for some of the items that are allowed for the AOTC. This credit is generally based on tuition and fees.

Tuition and Fees Deduction

The Tuition and Fees Deduction applies to qualified education expenses for higher education for an eligible student taking undergraduate, graduate or post graduate courses. The deduction gradually phases out after a certain income range. There is no limit to the number of years the deduction can be claimed.

Roth IRA

The income earned from summer and/or after school employment by the student can be contributed to a Roth IRA, which will grow tax-free. The earnings are taxable and subject to a penalty only if withdrawn before the age of 59 ½ or within 5 years of opening the account.  Parents may want to consider funding their student’s Roth account to start a life-long savings program.

Give us a call if you have a student going back to school this fall.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 367 | Ohio Dept of Taxation: Beware of Local Tax Scam August 10, 2016

Posted by bradstreetblogger in : General, Tax Tip, Taxes , add a comment

Tax Tip of the Week | August 10, 2016 | No. 367 | Ohio Dept of Taxation: Beware of Local Tax Scam

Tax Commissioner Joe Testa  issued a public warning to individual and business taxpayers in Ohio about an apparent tax scam that has surfaced in southwestern Ohio.

Residents and businesses in Butler and Hamilton counties have been receiving a postcard through the mail sent by what is called the “State Tax Commission” offering to settle delinquent tax debts for a small fraction of the amount owed.

The postcard appears to imply that a “one time offer” is available to recipients from an official-sounding tax entity that claims it has the authority to offer tax settlements.

Tax Commissioner Testa warns that the Ohio Department of Taxation is not involved with the entity sending these postcards and has not made any of the tax settlement offers mentioned.

Tax Commissioner Testa urges anyone receiving these mailings to visit the following Federal Trade Commission link for more information on tax relief companies.

https://www.consumer.ftc.gov/articles/0137-tax-relief-companies

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 366 | Sales Tax “Holiday” Returns Aug 5 – 7 August 3, 2016

Posted by bradstreetblogger in : General, Tax Tip, Taxes , add a comment

Tax Tip of the Week | August 3, 2016 | No. 366 | Sales Tax “Holiday” Returns Aug 5 – 7

Ohio’s sales tax “holiday” isn’t an annual event – yet – but it might be time to institute a celebratory cookout or decorative pole.

The promotion will be held for the second time from Friday, Aug. 5 through Sunday, Aug. 7, 2016. As in 2015, the bill’s tax exemption applies to items of clothing up to $75 each and school supplies and instructional materials up to $20 each. It covers all retailers that sell these goods to Ohio residents, including online merchants. Items used in a trade or business, are not exempt.

The promotion is proving popular among lawmakers and some retailers, though others aren’t convinced.

The Ohio Department of Taxation has published a list of all eligible items and FAQs.

Please celebrate responsibly.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.