IRS

Deduct Home Office on Taxes

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Deduct Home Office on Taxes 1

A home office tax deduction can be a great way to reduce your taxes if you own a small business. The home office deduction gets a bad rap because a few years ago, deducting a home office was seen as an “audit trigger.” However, that issue was blown out of proportion then, and it is almost a non-issue these days, provided you do have a business and a legitimate home office. So, how do you deduct home office on taxes? How To Qualify for a Home Office Deduction Qualifying for a home office tax deduction for your business is pretty simple, providing you have a home office that you use. The official rules state that your home office must be your primary place of business, and that you use the office exclusively for that business. In other words, you can’t deduct the little area you have setup in the corner of your living room as a home office. People giving tax advice will often go overboard here saying things like, if there is even one toy in your office, then it is disallowed as a deduction. This scares legitimate small business owners with home offices from deduction them sometimes. Keep …

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Stimulus Deposits Start Showing Up

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There has been some grumbling about the way banks handled the new $1,400 stimulus payments, but the reality is that the treasury did not fund those deposits until today (Wednesday). We can talk all you want about how guaranteed the money was, and that big banks like Wells Fargo and Chase Bank could have easily floated their customers the $1400, but that is never how full-size grown up banks work. Some smaller banks use faster deposits, or even pre-deposits as a way to distinguish them from bigger banks. One article noted that mobile-only, startup, Current put the stimulus payments in their customer’s accounts early. Of course, that’s one of Current’s offers, “Get paid up to 2 days faster.” Doing so requires the bank to use it’s own money to cover the payment until it actually shows up. You can see why big “safe” banks don’t play that. For the record, the ACH deposits into accounts were funded by the IRS as of Wednesday, March, 17, 2021. That means that if your bank put the money in your account before then, they used their own money to do that, then paid themselves back when the IRS money showed up. If your …

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Business Tax ID Number – FEIN and EIN Explained

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There is an unfortunate amount of confusion surrounding the concept of the Federal Tax Identification Number. It is ironic, because the whole Tax ID, FEIN, and EIN thing is actually very simple, mostly because they are generally all the same thing. However, it isn’t surprising that this concept confused many personal finance students because when it comes to things like laws and taxes, tiny variations in terms usually mean very different things. What is a Tax ID Number? Tax ID Number, or Tax Identification Number (TID), and the like, all refer to the same thing. When taxes are filed, whether they are personal income taxes, or business income taxes, there must be a unique identifier used on the tax return. Likewise, if income is reported, that income must be reported to the IRS with a unique number identifying who it was paid to. In the case of Federal Income Taxes, the tax ID number is a Social Security Number. However, businesses do not have SSN, so they need a different unique number to use for identification purposes on tax documents. FEIN stands for Federal Employer Identification Number. It’s “brother” is the EIN which stands for Employer Identification Number. What Is …

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Roth IRA Income Limits 2022 and 2023

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The questions have started coming in regarding the 2022 and 2023 income limits for Roth IRA contributions. Planning ahead for taxes is always a good idea. However, sometimes, you can get out a little bit too far. The IRS publishes various numbers, tax brackets, and the like for the next tax year during the fall of the previous year, depending upon what the number is, and how it is to be calculated. Maximum salary limits for Roth IRA contributions in 2023, for example, were known well in advance because the number was set by the IRS in advance. However, the income limitations for Roth IRA contributions are indexed for inflation. In other words, the IRS must wait until it has the proper inflation index calculation according to its rules and regulations. Then, it must apply that inflation amount to the Roth IRA contribution limits for income and compute new Roth IRA income phase-out limits and the maximum salary allowed to make Roth contributions at all. Don’t forget, the law removing the salary cap for converting a traditional IRA to a Roth IRA has been made permanent, so you can convert your IRA to a Roth IRA regardless of how high …

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Difference Between a Rollover and a Transfer

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ira transfer 401k rollover

When it comes to rollovers or transfers between 401k accounts and IRA accounts, one word makes a lot of difference. So, what exactly is the difference between a rollover and a transfer? A 401k rollover requires that 20 percent of the amount being rolled over be withheld for taxes, even though the IRS still requires the account owner to deposit 100 percent of the amount within 60 days to avoid taxes and penalties. This means that the account owner has to come up with that 20% on his own, and be sure to deposit it with the 80% proceeds he actually receives. A 401k transfer requires no withholding and moves the funds tax-free. As a result, a 401k transfer is better than a 401k rollover in most cases. Likewise, an IRA rollover gives the account owner 60 days to deposit any rolled over funds into a new IRA account. IRS rules limit each taxpayer to only one rollover per year. An IRA transfer moves the money directly to a new qualified retirement plan account with no delays and with no one per year limits. While many of these rollovers are handled electronically, some are done by a check made out …

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2023 Required Minimum Distributions

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If you have an IRA or 401k and you are over 70 1/2-year-old, you need to take a required minimum distribution, or RMD, from your retirement account each year. However, with the coronavirus pandemic, Congress passed specific relief for certain kinds of retirement accounts creating different rules for your 2023 RMD. New 2023 RMD Rules Normally, taxpayers over the age of 70 1/2 years old have to take money out of their retirement accounts like IRAs and 401k plans. The reason is simple. The IRS doesn’t want that money sitting there untaxed forever. So, when you get into retirement, it wants to tax that money that you enjoyed paying no taxes on for all of those years. With the coronavirus pandemic of 2020, however, Congress looked to provide some relief to taxpayers in the form of $1,200 payments, small business loans, and relaxing the rules on accessing and using retirement plan money. One of those benefits is the suspension of required minimum distributions, or RMDs, for 2020. All RMDs, regardless of the owner’s age, or how many required minimum distributions have already been taken are suspended for 2020. In other words, there are no required distributions during 2020. If you …

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How To Deduct Property Taxes

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Property taxes can be an important tax deduction for many home owners. Real estate taxes, in particular, can be a significant tax deduction.

Fix RMD Tax Problems With QCD

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You’ve spent a lifetime saving for retirement, and you did a really great job. So great, in fact, that you don’t need to take money out of your IRAs. But, you’ve turned 70 1/2, and now the IRS is forcing you to withdraw money from your IRA every year in the form of a Required Minimum Distribution, or RMD. Is there any way to get around having to take an RMD? Mitigating Your RMD’s Affect On Your Taxes The IRS gave you years of tax relief on the funds in your IRA. They only did that to encourage you to save for retirement. Now, that you’re retired (or at least retirement aged) they want their money now in the form of taxes on your IRA withdrawals, but if you played your cards right, you might not ever need to withdraw, and the IRS would have to wait longer for that money. The IRS hates waiting.  The RMD keeps this from being the case. Once you turn 70 1/2 years old, you have to take some money out every year, and the government is there, waiting to tax it. Unfortunately, there is no way to get out of having to take …

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2017 Finances and Money Issues

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Welcome to 2017! Relax. Take a deep breath. There. Feel better? Good. Then let’s jump in. Finances Updated in 2017 With a new year, come some new numbers. There will be updates to the maximum 401k contributions, income limits for Roth IRAs, and others. Plus, there will be adjustments to the 2017 income tax brackets, the 2017 standard tax deduction, and more. And, of course, there is a new IRS mileage rate for 2017 as well. What about 529 plans? There aren’t a lot of updates to those numbers each year, primarily because most facets of 529 college savings plans are administered through the states, who aren’t always as keen on changing and updating everything. You’ll want to re-evaluate your financial plan for the new year, and you’ll want to review how your financial plan did in 2016. Plus, you’ll want to rebalance your portfolio, if you didn’t do it at the end of 2016. Retirement Plans 2017 A big part of most retirement plans are tax-advantaged savings accounts like your 401k plan, IRA accounts, and, for some of you, 457 plans, 403(b) plans, and various differed compensation plans. All of those need adjusted and reviewed for 2017 as well. …

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Using 529 Plans for Estate Planning

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Estate planning is one of those topics that seems to be widely misunderstood. First, there are different kinds of estate planning. The most necessary kind for everyone is simply having a will of some sort. It really doesn’t have to be anything fancy, especially if you don’t have a lot of assets. There are a lot of forms out there you can fill in. While that is definitely NOT the way to go if you have anything complicated or fancy, or if you have a lot of assets, they are pretty much fine for the average person. The second type of estate planning is financial estate planning, that is trying to avoid paying estate taxes. This actually applies only to a small percentage of people. Will I Have to Pay Estate Taxes? Nope. That was easy, huh? It’s a trick of semantics. Estate taxes are the only taxes that you will never have to pay. That’s because your heirs, or more specifically, your estate, actually pay estate taxes after you are dead, so you don’t pay them. Even if you inherit something, you don’t pay the taxes, the estate does, before the assets become yours, so technically, no person ever …

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