Do you often make purchases that are directly related to your job? If you do, you may be able to deduct certain work-related expenses that are not reimbursed by your employer. The following information can help you determine which expenses are deductible as an employee business expense. You must itemize your deductions on IRS Schedule A to in order to qualify.

Here are the expenses that generally qualify for an itemized deduction:
• Business travel away from home
• Business use of your car
• Business meals and entertainment
• Use of your home
• Education
• Tools
• Supplies
• Miscellaneous expenses

If you are going to record business expenses as deductions, you must keep records as proof.

For more information on keeping records for your tax filing, see IRS Publication 552, Recordkeeping for Individuals available on the IRS website at www.irs.gov, or call 1-800-TAX-FORM (800-829-3676).

You should report  expenses that are not reimbursed on IRS Form 2106 or IRS Form 2106-EZ and attach it to Form 1040. Deductible expenses are then reported on IRS Schedule A, as a miscellaneous itemized deduction subject to a rule that limits your employee business expenses deduction to the amount that exceeds 2 percent of your adjusted gross income.

For more information see IRS Publication 529, Miscellaneous Deductions, which is available on the IRS website at www.irs.gov, or by calling 1-800-TAX-FORM (800-829-3676).

Daniel Stoica Accounting Professional

Did you or anyone in your family have significant medical or dental expenses last year?  If you did, you may be able to deduct those expenses when you file your tax return.

The following information will help you consider your medical or dental expenses when you file your tax return.

1. First of all, you must itemize your qualifying medical and dental expenses using Form 1040, Schedule A.

2. On Form 1040, Schedule A, you can deduct medical care expenses that exceed 7.5% of your adjusted gross income for the year.

3. You can include the medical and dental expenses you PAID during the year, regardless of when the services were provided. Make sure you have good receipts or records to prove your expenses.

4. You cannot count any expenses that have been reimbursed to you. Your total medical expenses for the year must be reduced by any reimbursement. Normally, it makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.

5. You may include qualified medical expenses you pay for yourself, your spouse and your dependents. However, check with the IRS or a tax professional if you are divorced or separated because some exceptions and special rules apply to divorced or separated parents, taxpayers with a multiple support agreement or those with a qualifying relative who is not your child.

6. You can deduct expenses primarily paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or treatment affecting any structure or function of the body. For drugs, you can only deduct prescription medication and insulin. You can also include premiums for medical, dental and some long-term care insurance in your expenses. Starting in 2011, you can also include lactation supplies.

7. You may deduct transportation costs that are essential to medical care that qualify as medical expenses. You can deduct the actual fare for a taxi, bus, train, plane or ambulance as well as tolls and parking fees. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses, which is 19 cents per mile for 2011.

8. Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if used to pay qualified medical expenses including prescription medication and insulin.

For additional information about medical and dental expenses, see Publication 502, Medical and Dental Expenses or Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Some Helpful Links:

• Publication 502, Medical and Dental Expenses (PDF)
• Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans (PDF)

Daniel Stoica Accounting Professional

Even though your income tax return is not due until April, important tax documents will start arriving in your mailbox. Make this your best tax filing year ever by being organized and getting an early start.

Here are some tips to make the tax-filing process as smooth as possible.

1. Put your records together in one place. Gather up your receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.

2. Watch for your W-2s and 1099s in the mail and put them with your receipts and other supporting documents.

3. Check out Free File. If you made $57,000 or less last year, you qualify to use free tax software. Visit www.irs.gov/freefile to review your options.

4. Plan to use IRS e-file. If you are getting a refund, you’ll most likely receive your refund by direct deposit within 14 days if you e-file. E-file is safe and easy and is now the most common way to file a tax return.

5. Choose direct deposit. When you choose direct deposit, especially when you pair it with e-file, you’ll receive your refund in the fastest possible time. Plus, there’s no chance of a check being lost or stolen. Last year, thousands of refund checks were lost or stolen.

6. Read the Tax Guide. Everything you ever wanted to know about filing your 2011 taxes is in the booklet here: http://www.irs.gov/pub/irs-pdf/p17.pdf

7. Visit the IRS website. www.irs.gov contains forms, publications, tips, videos and FAQs.

8. Consider using a tax professional. Although you will be charged a fee to use their services, qualified tax professionals will ensure that your returns are accurate and that all options for tax deductions and tax credits have been explored.

Daniel Stoica Accounting Professional
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Take advantage of the Small Business Health Care Tax Credit

If you are a small business owner with employees who pays at least half of your employee health insurance premiums, you may qualify for a tax credit of up to 35% of the premiums paid. Employers with fewer than 25 full-time employees who pays an average wage of less than $50,000 a year may qualify.

The maximum credit for tax years 2010 to 2013 is 35% for small business employers and 25% for small tax-exempt employers such as charities. On Jan. 1, 2014, this rate will increase to 50% and 35%, respectively.

You can carry the credit back or forward to other tax years even if you did not owe tax during the year. And since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

Eligibility

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 a year.

The amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 full-time equivalent employees, or if the average wage is more than $25,000, the amount of the credit you receive will be less.

Claiming the Credit

In order to calculate the credit, you must use Form 8941, Credit for Small Employer Health Insurance Premiums.

If you are a small business, include the amount as part of the general business credit on your income tax return.

If you are a tax-exempt organization, include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don’t usually do so.

Remember… If you are a small business employer you may be able to carry the credit back or forward. And if you are a tax-exempt employer, you may be eligible for a refundable credit.

For more information, check out the Small Business Health Care Tax Credit page on IRS.gov.

Daniel Stoica Accounting Professional

There’s still time to contribute to your IRA.

Did you know that you have until April 17, 2012 to set up a new IRA or add money to an existing IRA and have it count for 2011? Although you must make all elective deferrals to employer-sponsored 401(k) plans by December 31, 2011, the April deadline for new IRAs or existing IRAs is good news for those taxpayers who need some extra time to add to their 2011 contributions. You can normally contribute up to $5,000 to a Roth or traditional IRA. If you’re 50 or over, the amount increases to $6,000.

It is normally best to try and make the maximum annual contribution to an IRA because of the tax advantages of investing through an IRA. Contributing to an IRA has a use-it-or-lose-it nature because you can’t make up for years that you did not contribute the maximum amount. For instance, if you contributed only $2,000 in 2010, you cannot make up the difference in 2011. But you can start making the maximum contribution THIS year!

For more information, speak with a tax professional.

Daniel Stoica Accounting Professional

The Earned Income Tax Credit (EITC) is a popular tax credit for low-and moderate-income workers and working families. Approximately one in five eligible taxpayers do not claim the EITC, but many who do claim the credit do so incorrectly or are even ineligible. In order to ensure that the credit is taken by those taxpayers who do qualify, the IRS is now requiring all paid tax return preparers to file a due diligence checklist, or Form 8867, with any federal tax return that is claiming the EITC. This form is normally required to be completed and filed in a preparer’s records, but now the form must also be included with the returns.

Unlike most deductions and credits, the EITC is refundable, meaning that taxpayers can get it even if they owe no tax. For 2011 tax returns, the maximum credit is $5,751.

To make sure that eligible taxpayers receive the correct credit amount, this new reporting regulation requires preparers to file the Form 8867 with each return that claims the EITC, effective January 1, 2012. In addition, the penalty for noncompliance with the due diligence requirement has increased from $100 to $500.

More information about EITC and the due diligence requirement for tax return preparers is available on IRS.gov.

Daniel Stoica Accounting Professional

At the end of the calendar year, many taxpayers make last-minute charitable contributions in order to help others AND reduce their taxable income.

For information about charitable contributions, check out this “mini-course” endorsed by the IRS: http://www.stayexempt.irs.gov/Mini-Courses/Can_I_Deduct_My_Charitable_Contributions/can_i_deduct_my_charitable_contributions.aspx.  This 20-minute course covers monetary donations as well as the donation of household goods such as clothing or furniture.

Generally speaking, to deduct a charitable donation of money, a taxpayer needs to have a written communication from the charity showing the name of the charity as well as the date and amount of the contribution. A bank record such as a canceled check, bank statement or credit card statement will also suffice if the name of the charity as well as the date and amount paid to the charity is included on the bank or credit car record. It’s also important to verify that the charity is a qualified one.

For more information about charitable donations, either monetary or clothing and household goods, visit the link above or visit the “Charities and Donations” section on the IRS website (www.irs.gov). You may also want to speak with a tax professional.

Daniel Stoica Accounting Professional

Many people give to charities toward the end of the calendar year because they are in the giving spirit AND because they realize that they don’t have much more time to take advantage of tax deductions.

The following are some reminders about year-end giving.

• Make sure that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.
• If at all possible, get a receipt from the charity when you are donating property such as clothing and household items. Ideally, the receipt should include the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
• Charitable contributions are deductible in the year they are made. If you charge a donation to a credit card before the end of the year, but the credit card bill isn’t paid until the following year, you still get to claim the deduction for the year is which the charge was made. Also, checks count for the year they were written as long as they are mailed during that year and clear shortly thereafter.
• Only individual taxpayers who itemize their deductions on Form 1040 Schedule A may claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2009 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
• The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
• If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

If you have any questions about charitable donations and your taxes, contact a tax professional.

Daniel Stoica Accounting Professional

Claiming credits on your taxes will save you more money than taking tax deductions. A credit is a decrease in the amount you owe the IRS. A deduction is a only a decrease in gross revenue (income) before you figure how much tax you owe.

Here are some of the most common credits taxpayers may be able to take.

1. Education Tax Credits: There is the Hope Credit and the Lifetime Learning Credit. The Hope credit is for college tuition payments for you, your spouse or dependent. You can claim this credit for the first two years of college, for up to $1,650. On the Lifetime Learning Credit, you can claim up to $2,000 every year you, your spouse or dependent are in college.  For more info on these credits, read this post.

2. Adoption Tax Credit: Adopting a child can be very expensive, but you can claim a credit of up to $10,690 for the costs associated with adoption. There are certain rules you must follow in order to qualify for this credit, so you may want to contact a tax professional about your options. There is an income cap of $164,410 to be able to claim this credit.

3. Going Green: For several years now, the government has encouraged taxpayers to use more energy efficient products in in their homes, as well as hybrid vehicles. Energy efficient appliances, windows, water heaters, and solar panels can be a huge credit on your taxes.

4. Retirement Savings Tax Credit: The government gives tax credits to taxpayers who earn less than $25,000 as a single filer and $50,000 as joint filers while they put money in a retirement credit. The credit can be up to $1,000 depending on how you filed.

There are many other credits for which you may qualify. Talk to a tax professional to find out which credits you can claim.

Daniel Stoica Accounting Professional

For many taxpayers, tax time can be daunting and tedious. Most of us don’t really like doing our taxes, but there can be a silver lining when we find out we’re getting a big refund. Many taxpayers aren’t aware of the deductions they can take to save themselves a lot of money. Read on for a list of deductions that you can take.

Common Tax Deductions

1. Deductible Taxes: You can take deductions on your state and local income taxes, foreign income taxes, real estate taxes, and property taxes. For taxpayers who sold their home and purchased a new one last year, they can deduct the property taxes on both homes for a larger deduction. They can also claim pre-paid property taxes.

2. Deductible Interest and Points: Mortgage interest, home equity loans and student loan interest can be deducted. Any discount points that resulted in a smaller interest rate on your mortgage can be deducted, as well. Certain refinancing fees may be deducted, as well. Pre-payment penalties, pro-rated interest and pre-paid interest on your mortgage can be deducted.

3. Charitable Contributions: Included in these deductions are cash and non-cash donation to non-profits. You will need to keep your receipts. For non-cash donations, you can deduct the “fair market value” of the item you donated.

4.  Business Use of Home and Car: For the self-employed, you can take a deduction on anything that is used exclusively for your business. Office supplies, any memberships, gas, and mileage can be deducted. Part of your mortgage, property tax, and certain utility bills, such as internet and telephone, can also be deducted. You will have to keep your receipts and keep records of your travel expenses if it is part of your business.

5. Other Deductions: The following deductions can’t be placed in the above categories, but they can save you money. You can claim the child tax credit if you have qualifying dependents. You may also claim retirement savings and medical costs that were paid out-of-pocket. You can claim some educational costs like tuition and books. If you have property loss that wasn’t covered by your insurance that was due to fire or weather damage, you can claim those expenses. If you move more than 50 miles from home for a new job, you can deduct those expenses. The entire move isn’t deductible, but some expenses are.

Although this isn’t a complete list of deductions you take or credits you can claim, it’s a good starting point. Consult with a tax professional for more deductions and credits to get the maximum amount you’re entitled to.

Daniel Stoica Accounting Professional