It?s Time to Get Your Mid-Year Tax Projections

Want to make sure you?re taking steps to reduce your tax burden for 2017?

Do you have self-employment income, multiple sources of income, a job change or unexpected income in 2017?

If so, our Mid-Year Tax Projection Service will help!

We?ll calculate a mid-year tax projection, adjust your estimated tax payments if beneficial, and strategize your tax planning for the rest of 2017 to help reduce your tax burden. A fee does apply for this service.

Call us at 781.938.0045 to learn more or to schedule an appointment.

Save Yourself $125 or More Next Tax Season If You Have Working Kids

The IRS wants to help parents of working children avoid the headaches and costs of preparing tax returns for their kids who won’t earn enough to be taxed.? All you need to do is have your child write the word “Exempt” in Box 7 of the?Form W-4?that is generally completed the first day of employment.? If your child previously submitted an incorrect W-4, please have them file a corrected one with their employer as soon as they can.

Please note that a working child will generally owe no income taxes unless wages earned exceed $6,400 (in 2017) and/or investment income exceeds $350.? Needless to say, most of the kids are getting back all the federal and state income taxes withheld during the year.

Here is what the IRS says in their instructions to the Form W-4:

Exemption from withholding. If you are exempt, complete only lines 1, 2, 3, 4, and 7 and sign the form to validate it.

And here are the instructions on the W-4 for line 7:

I claim exemption from withholding for 2017, and I certify that I meet both of the following conditions for exemption.

  • Last year I had a right to a refund of all federal income tax withheld because I had no tax liability, and
  • This year I expect a refund of all federal income tax withheld because I expect to have no tax liability.

If you meet both conditions, write ?Exempt? here.

Do yourself and your kids a favor by having him or her write the word “Exempt” on Line 7 of the W-4 form.? Your working child will have more money to spend sooner (and will hopefully ask you for less of your money during that time) since no federal and state income taxes will be withheld from their wages.? And you won’t get stuck preparing a 1040-EZ for your child or paying your CPA $125 or more so your kid can get back their tax refund on money that didn’t need to be withheld in the first place.

Info to Share with Your Millennial Child

We’ve put together 2 short recorded presentations to help explain these rules to parents and their kids.? Visit our MDTAXES YouTube Channel to view:

Buying a New Fuel-Efficient Car in 2017?

The IRS still offers tax credits up to $7,500 on all-electric and plug-in hybrid cars that you would claim on your 2017 tax return.

The vehicle must:

  • weigh less than 14,000 pounds,
  • have at least four wheels,
  • be propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours, and
  • is capable of being recharged from an external source of electricity.

For a full list of qualifying cars by make and model, visit the U.S. Dept. of Energy?s website at: https://fueleconomy.gov/feg/taxevb.shtml

 

Maximize Tax Deductions During Your Summer Travels

With the summer travel season nearly upon us, here are some tips and rules about deducting business travel expenses:

  • Travel expenses?are the ordinary and necessary expenses of traveling away from home for your business, profession, or job.
  • You are traveling away from home if your duties require you to be away from the general area of your tax home for a period substantially longer than an ordinary day’s work, and you need to get sleep or rest to meet the demands of your work while away and before returning home.
  • Deductible travel expenses while away from home include, but aren’t limited to: travel by airplane, bus, train, or car, meals and lodging, tips you pay for services related to these expenses.
  • The government does allow a standard meal allowance / per diem rate that you can deduct in lieu of actual meal expenses. The per diem rates vary based upon location and can be looked up on the?GSA website.? You will calculate your deduction for meal and entertainment for each trip based on the per diem rates or actual expenses incurred.
  • For domestic travel, the trip needs to be primarily for business.? For foreign travel, the threshold is exclusively for travel (subject to various exceptions on what actually constitutes exclusivity.)
  • You may deduct travel expenses, including meals and lodging, you incurred in looking for a new job as long as you have established yourself in your present trade or business.
  • You can deduct travel expenses paid or incurred in connection with a?temporary work assignment?away from home.? The temporary assignment cannot be considered indefinite or cannot be expected to last longer than one year. You also need to intend to return back to your original home to continue working at the end of the assignment.

Want More info?

Visit www.IRS.gov to read IRS Publication 463 on Travel Expenses. Travel expenses incurred in connection with a?job-related move are claimed on IRS Form 3903.

This Year?s Most Interesting Tax Season Observations

by?Andrew D. Schwartz, CPA, Founder of The MDTAXES Network

At some point during each tax season, there is a moment when I notice a recurring trend or theme that is unique and fascinating to that specific tax season. So what is this year’s most interesting trend?

For the 2017 tax season, what I found most fascinating is the number of clients who installed solar panels on their home during 2016. People who added solar property to their homes are eligible to claim a federal tax credit equal to 30% of the costs incurred.

Remember, a tax credit is a dollar-for-dollar reduction in the taxes you owe.?Spending $40k on solar panels for your home, therefore, translates to a $12k reduction in the federal income taxes you’ll pay that year. You report this valuable tax break on a?Form 5695.

Many states allow taxpayers to claim a solar tax credit as well.? For example, Massachusetts allows a tax credit of up to $1,000 while New York allows up to $5,000 in tax savings for installing solar.

Please note that the solar credit has been extended through 2021.? However, the full 30% tax credit applies only through 2019, then the credit decreases to 26% of eligible costs incurred for 2020, and then decreases again to 22% for 2021.

According to the?Instructions of Form 5695:

Qualified solar electric property costs.?Qualified solar electric property costs are costs for property that uses solar energy to generate electricity for use in your home located in the United States. No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed. The home doesn’t have to be your main home.

Qualified solar water heating property costs.?Qualified solar water heating property costs are costs for property to heat water for use in your home located in the United States if at least half of the energy used by the solar water heating property for such purpose is derived from the sun. No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed. To qualify for the credit, the property must be certified for performance by the nonprofit Solar Rating Certification Corporation or a comparable entity endorsed by the government of the state in which the property is installed. The home doesn’t have to be your main home.


Prior Year Trends:

2016:

Increase in the number of clients choosing to allocate $3 of their tax liability to the Presidential Election Campaign Fund

2015:

More clients had energy efficient tax credits for purchasing solar panels, electric cars and even re-charging stations for those electric cars

2014:

A variety of tax hikes took hold causing higher taxes on lower income for high-income taxpayers

2013:

Uptick in the number of individuals taking advantage of Health Savings Accounts (HSA)

2012:

Record low interest rates meant many homeowners refinanced their home mortgages

Over 50? Your Savings Gets Better With Age

Wisdom isn?t the only benefit you get with age.

Starting the year you turn 50, you can make these additional ?catch-up? contributions towards your retirement accounts:

  • Up to $6,000 more for 401(k), 403(b), SARSEP, or governmental 457(b)
  • Up to $3,000 more for SIMPLE IRA or SIMPLE 401(k)
  • Up to $1,000 more for traditional or Roth IRA

These amounts are ON TOP OF the standard limits everyone is allowed to contribute in 2017:

  • $18,000 for 401(k), 403(b), SARSEP, or governmental 457(b)
  • $12,500 for SIMPLE IRA or SIMPLE 401(k)
  • $5,500 for traditional or Roth IRA

Upon turning 55, you can also contribute an extra $1,000 to your Health Savings Account (HSA) over and above the current limits of:

  • $3,400 (Self coverage) or $6,750 (Family coverage) for HSA

Remember: it?s never too late to save additional monies towards your retirement. Even a small increase towards your savings made with each paycheck will make a positive impact to your bank account when you?re a retiree.