9 most overlooked tax deductions

Out of pocket charitable deduction – e.g. ingredients for meals you prepare for a nonprofit soup kitchen. Postage for fundraising mailing.

Charity mileage – you can deduct 14 cents per mile plus parking & tolls.

Student loan interest paid by the parents

Job hunting costs

Moving expenses to take your first job

Child care credit

Mortgage refinancing points

American opportunity credit

Credits for energy saving home improvements

 

John Jeng, CPAImage

Most common tax filing mistakes

I have compiled a list of the most common tax filing mistakes that most taxpayers made.

Forget to sign your return – you must sign your taxes for the IRS to process your taxes.

Filling out tax forms with an incorrect SSN – the IRS computers will reject your deductions and credits if your SSN is wrong.

Forget to tell your CPA you took an ealy distribution on an IRA – if you are under the age of 591/2, a distribution on an IRA is considered early and subject to a 10% additional tax.

Fail to report non-deductible IRA contributions – All contributions to an IRA must be reported.

Standard mileage vs. actual expenses for business use of car – you can only choose one method when you start using the car and continue with that method until you replace the car.

Incorrectly reported estimated tax payments – if the tax payments did not match, IRS will send a notice of tx due with penalties and interest.

Exceeding the mortgage interest deduction limit – the tax laws limit the amount of deductible interest to the first $1.1 million in total debt.

John Jeng, CPA

 

Tax saving strategies for small business owners

Tax planning has never been more important given the incoming tax increases and the coming end of the 2012 tax year.  Given the fiscal climate we are soon to enter, I am sharing some tax strategies to help you maximize your returns before the 2012 tax year comes to a conclusion.

Accelerate or Defer income –  tax rates are expected to increase from current historical low rates. If you are in the top tax bracket, it may be better to accelerate income. However, those in the lower tax brackets should follow the traditional tip of deferring income.

Accelerate expenses – you can accelerate expenses to reduce your business taxable income. Buy goods and services needed by your business. Pay early bills like phone services, subscriptions, rent, insurance, utilities and office supplies.

Equipment expensing – you can deduct up to $139,000 of equipment purchased in 2012. This tax break applies only to equipment purchased in 2012. Current law also extends 50% bonus depreciation to 12/31/2012.

Retirement plan – set up a self-employed retirement plan if you are self-employed and have not done so yet.

Increase basis in a partnership or S corporation – if doing so will enable you to deduct a loss from it for this year. A partner’s share of partnership losses is deductible only to the extent of his partnership basis as of the end of the year in which the losss occurs. An S corporation shareholder can deduct his pro rata share of an S corporation’s losses only to the extent of the total of his basis in his S corporation stock, and debt owed to him by the S corporation.

These are just some of the year-end steps you can take to save taxes. If you have any question, I urge you to contact me for a free consultation.

Sincerely,

John Jeng, CPA

 

Tax saving strategies to secure a large refund

Few weeks ago I hosted a seminar about using various tax saving strategies to secure a large refund for individuals. In this post, I am going to highlight some of the key points and share with our readers.

Maximize contribution to a 401k plan – the limit for this year is $17,000 per person. This strategy alone will save you big money in taxes. If you can’t maximize it and you employer offers a match, at minimum contribute the amount necessary to get the maximum match so you don’t miss out on that “free” money.

Participate in your employer’s pre-tax benefit plans - this include commuter benefits, group life and L-T disability insurance, medical FSA, dependent care FSA.

Deduct employee business expenses – unreimbursed expenses include cars, meals, travel, home office, license fees, professional subscriptions, telephone, and office supplies.

Contribute to your IRA or Roth IRA - your contribution to the traditional IRA may be deductible. Roth IRA contribution is not deductible but it’s a great way to save for your retirement.

Charitable contribution – it can be cash or non cash. Consider donating used items to Salvation Army & Goodwill and get tax deductions. You can also donating appreciated stock, that way you will never have to pay tax on the appreciation and your donation is equal to the fair market value of the stock.

Assess whether investment portfolio should be re-allocated – 15% long term capital gain rate is scheduled to return to 20% in 2013. Qualified dividend is scheduled to be taxed at your marginal ordinary income rate. Planning tip – consider selling highly appreciated assets by end of the year.

Use unrealized losses to absorb gains – you can sell the original stock, and then buy back the same stock at least 31 days later.

Consider Roth IRA conversion - Roth IRA payouts are tax-free and thus immune from the threat of higher tax rates.

These are just some of the strategies that can be taken to save taxes. By contacting me, we can personalize a plan that will work best for you.

Sincerely,

John Jeng, CPA