Tax Planning TIps to Maximize Your Return

ta returns

As you prepare to file your tax returns, you should also be planning to maximize them, reduce your tax bill and/or get the biggest refund you can. Many unseasoned tax payers are not sure how to do this and feel reluctant to make claims due to their lack of knowledge. For their benefit, we present some simple, key steps to planning and maximizing your return.

Know your bracket

The IRS has seven income tax brackets and which one you fall into depends on your level of income. First, know what percentage of your income you are required to pay, then understand that you will not actually pay those percentages on your full income. This is because you will be able to make deductions from your taxable income. So first determine your tax bracket, then break down your income into the prescribed income types that you earn. Each part of your income will be taxed differently.

Tax deductions and credits

Next, make sure that you know the difference between tax deductions and tax credits. Tax deductions are expenses you’ve incurred that you can subtract from your taxable income. Credits actually give you a dollar-for-dollar reduction on your tax bill. Once you understand how these work, you then need to find out which deductions and credits you are actually eligible for. Often people don’t even know that they can deduct certain expenses from their tax. You need to claim for each and every deduction you are eligible for, so make a point of knowing them all. There are hundreds and not all of them will be applicable to you. If you want to maximize your return, make use of every permissible, applicable deduction you can find.

Know when to take the standard deduction

The IRS offers a standard, no-questions asked deduction, which you can choose to take or you can opt for an itemized deduction that is calculated from your specific mix of deductions. Which one you choose to take will depend on the higher amount. If you can submit an itemized list of deductions and it comes up to more than the standard deduction, then you should itemize your deduction. If not, it’s best to opt for the standard one.

For additional, personalized assistance with your tax returns, contact Georgen Scarborough.

Important Tax Dates To Remember In 2020

tax deadlines

The New Year is already well underway and that means that a new tax year is here, as well the various deadlines for filing tax returns, etc. As providers of public accounting services, we at Georgen Scarborough always have our eye on the tax calendar. For your easy reference, we thought we would draw up a list of the key dates individuals will need to take note of for the coming years.

Tax Day

Tax Day for the 2019 tax year is April 15, 2020. You will need to have your returns filed on or before this date to avoid penalties.

If you are able to get an extension

If you are granted an extension, you will need to file your return by October 15, 2020. If you know that you will not be able to file your return on or before the official Tax Day, you will have to submit an IRS Form 4868, requesting an extension well before April 15.

State taxes

The above dates are only for federal taxes. You will need to find out when your filing deadlines are for your state (unless you live in Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming, where there are no state income taxes).

Estimated quarterly tax payments

For those people who do not have their taxes automatically withheld from their pay – such as people who are self-employed or those who are eligible to pay capital gains tax – payments need to be made to the IRS each quarter. January 15 is the deadline for the final quarterly payment of the 2019 tax year. After that, periodic payments will have to made each quarter: one in April, one in June and one in September.

These are the main dates you need to remember for in regard to your taxes in 2020. For more information on the filing of tax returns – or to engage the services of seasoned professional tax practitioners, contact Georgen Scarborough.

Are Any Part of My Home Payments Tax Deductible?

Homeowners know all too well how enormous repayments can be, never mind how much it costs to keep a home well-maintained and in good condition. Hence the reason why so many Americans are keen to find out if any part of their home payments are tax deductible. The great news is that there are multiple tax benefits that come with owning a home. We provide details on each of them below.

Property taxes

In most cases, property taxes are tax deductible. According to new law, the maximum amount of state and local property, income, and sales taxes that can be deducted at any one time is $10,000.

Mortgage interest deduction

All homeowners know just how much interest they wind up paying over the course of their mortgage. Luckily, this interest is also usually deductible. You will be able to determine how much mortgage interest you paid in box 1 when you receive your Form 1098.

Points paid when buying your home

This one applies to home owners who have only recently purchased their home and who paid points in order to land a better interest rate. Check box 6 in Form 1098 to find out how much you paid for points, which are tax deductible.

Private mortgage insurance premiums

If you opted for a traditional mortgage and you put down a deposit that was less than 20% of the value of the home, you likely paid private mortgage insurance premiums. The amount paid can be found in box 5 of Form 1098 and, once again, is usually tax deductible.

Home office deduction

Are you lucky enough to own your own business and work from home? Then you will be eligible to claim the home office deduction. You can choose to claim up to $1,500 which is the set dollar amount of $5 per square foot of your home used for your business up to 300 square feet. Alternatively, you may also claim based on a portion of your home expenses.

For more information, contact the Certified Public Accountants at Georgen Scarborough Associates.

Tax deductible donations: Subtract the value 
of your charitable gifts from your taxable income

Are you an individual who regularly donates to charities and charitable organizations? If so, you may be eligible to claim sizeable tax deductions. Here is what you need to know about how much you can deduct, how to claim tax deductible donations, as well as various qualifying criteria to keep in mind.

How much can I deduct?

You will be eligible for a tax deduction if your donation is given to a tax-exempt organization, as defined by section 501(c)(3) of the Internal Revenue Code. In most cases, you will be able to deduct up to 60% of your adjusted gross income via charitable donations. However, this does depend on the type of contribution that you made and the organization that received it.

If you exceed the limit, you will still be able to deduct the excess from tax returns over the next five years via carryover.

How to claim tax deductible donations

The only way is to itemize at tax time. In other words, you will need to fill in Schedule A along with the rest of your tax return. Try to do this ahead of the deadline, as it can prove much more complex than the average tax return.

Is volunteer work tax deductible?

Unfortunately not. However, mileage related to your volunteer work can be – as long as you are volunteering at a qualified organization.

Looking for a company to assist you with your tax deductible donations or your tax filing in general? Get in touch with the Certified Public Accountants at Georgen Scarborough Associates today!

Child Tax Credit 2019: How to Qualify

child tax credit

As most parents in the USA are now aware, the dependency exemption of $4,050 has been eliminated. Thankfully, though, it is still possible to apply for various tax benefits and credits if you have children or dependents in your care. One of those benefits is the Child Tax Credit. Interested to know if you qualify to receive it? We have got all the facts below:

What Are the Qualifying Criteria? 

There are only four qualifying criteria when it comes to the Child Tax Credit for the tax year of 2019:

  1. You need to have at least one child in your care who is under the age of 17 at the endchild tax credit of the calendar year.
  2. You need to earn less than $400,000 per annum if you are filing jointly with your spouse OR less than $200,000 per annum if you are single and filing individually. 
  3. You need to have provided at least half of the child’s support over the course of the last year.
  4. The child needs to have lived with you for a period of at least six months over the course of the last year (there are some exceptions to this rule).

How Much Is the Child Tax Credit Worth for the Tax Year of 2019? 

You can get up to $2,000 per qualifying dependent child through the Child Tax Credit. Seeing that it is a tax credit rather than a deduction, it reduces your taxes dollar-for-dollar. Furthermore, up to $1,400 of the Child Tax Credit is refundable. In other words, it can take your tax bill right down to zero and you will still have the opportunity to get a refund on anything left over. child tax credit

If you have dependents living with you who are over the age of 17 but that still qualify as dependents (usually as a result of a disability), there is a $500 non-refundable credit that you can obtain via the Child Tax Credit benefit

Be sure to get in touch with the Certified Public Accountants at Georgen Scarborough Associates, PC, if you have any further questions about the Child Tax Credit and how to qualify. 

Having Dependents Has Significant Tax Benefits

child tax credit

Are you aware of the fact that having dependents still has the potential to save you hundreds of dollars in tax, despite the elimination of the dependency exemption of $4,050? It is true! Below, we provide you with some expert insight into the different tax benefits that you can continue to take advantage of going forward. 

Child Tax Credit 

Tax credits are different from tax deductions in that they reduce your taxes dollar-for-dollar. The great news is that while the dependency exemption is no longer in existence, the Child Tax Credit has been

child tax creditdoubled and is now $2,000 in total. You should qualify for this credit if you are the caregiver of one or more children under the age of 17, and if you and your partner’s income threshold is $400,000 (if you are married and filing jointly). If you are single, the income threshold currently sits at $200,000.

Child and Dependent Care Credit 

There is no doubt that working parents will all agree that childcare takes a massive chunk out of their earnings. Luckily, many of these parents are eligible to receive the Child and Dependent Care Credit. The only criteria are that you are employed or actively in search of a job and your child(ren) and/or dependents are under the age of 13child and dependent care credit or are disabled in some way. With this credit, you will also receive a dollar-for-dollar reduction of between 20% to 35% (depending on your annual income) of $3,000 ($1,050) for one child or $6,000 ($2,100) for two or more children.

Earned Income Tax Credit (EITC) 

If you earn less than a certain amount and you have children in your care, you may qualify to receive the Earned Income Tax Credit. For the tax year 2019, the credit ranges from $6,557 for three or more children down to $529 with no children.

earned income tax credit

Would you like more information regarding tax benefits in the USA? Then it is time to book an appointment with the Certified Public Accountants at Georgen Scarborough Associates, PC. Contact us today!

The IRS’ New 100% Depreciation Deduction and What Write-Offs You Can Look Forward To

100% depreciation deduction

In September of 2019, the Treasury Department and the Internal Revenue Service released final regulations and additional proposed regulations under section 168(k) of the Internal Revenue Code on the new 100% additional first year depreciation deduction. This 100% depreciation deduction is great news for businesses both big and small as it makes it possible for them to write off most depreciable business assets in the year they are placed in service by the business.

Below, we take a look at the depreciation deduction in more detail, along with a brief summary of the types of business assets that business owners will be able to write-off going forward. 

Which Assets Are Included?

According to the final regulations, depreciable business assets that can be written off in the year they are placed in service by the businesses include machinery, equipment, computers, appliances, and furniture, to name a few. However, these assets only qualify as write-offs if they were placed in service after September 27, 2017.

What Are the Additional Proposed Regulations That Have Been Submitted?

The additional proposed regulations include rules regarding:

  • Certain property not eligible for the additional first year depreciation deduction
  • A de minimis use rule for determining whether a taxpayer previously used property
  • Components acquired after September 27, 2017, of larger property for which construction began before September 28, 2017
  • Other aspects not dealt with in the previous August 2018 proposed regulations

I Want to Elect out But Have Already Filed my 2018 Tax Return – What Now?

Do not worry. Taxpayers who have filed their 2018 return already but who still wish to elect out of the 100% depreciation deduction will be granted a leeway of six months from the original deadline, without an extension, to file an amended return. You may wish to elect out if you would like to avoid the expiration of income tax credits or net operating losses.

Looking for professional assistance in terms of the new 100% depreciation deduction? Contact the financial service experts at Georgen Scarborough Associates today!

Tax Planning Tips for Small Businesses in the U.S.

Tax-preparation, CPA, tax advisor

Tax planning is essential for all businesses in the U.S. in order to ensure compliance and avoid hefty penalties. Remember, tax planning is not the same as tax-preparation (which is obviously just as important). Tax planning refers to the process of strategizing in terms of exactly what needs to be filed and which records need to be retained, as well as what deductions can be taken advantage of and which credits can be incurred. Tax-preparation, on the other hand, refers to the process of arranging your taxes for annual filings. 

With that in mind, here are a few helpful tax planning tips for small businesses, courtesy of Georgen Scarborough Associates. 

Seek out Assistance 

As the owner of a small business, you probably have a finger in every pie. In short, you have a lot on your plate and probably will not have enough time to dedicate toward the management of the financial aspect of your business. This is why it is strongly advised to partner with a tax advisor or CPA who can take over in this regard and assist in reducing the tax burden. 

Stay on Top of Deductions 

Make the most of the deductions available to you by ensuring that you keep detailed records of all related and relevant business expenses for audit purposes. You will need to hold on to the original vendor invoices and other receipts to prove that the expenses were made for business purposes, and not for personal gain. Bank statements will rarely suffice. 

Keep up to Date with Tax Law Changes

Tax laws are changing all the time! So, it is essential that small business owners keep abreast of how and when these changes are taking place – even if you work with a tax advisor. The IRS website is a wonderful resource for this kind of information. 

Looking for CPAs that you can count on for optimized tax planning? Look no further than the experts at Georgen Scarborough Associates. Contact us today. 

Tax Preparation Tips for Small Businesses

Tax tips for businesses

Do you own a small business? Trying to educate yourself in terms of how to prepare for the tax season? If so, you are also probably asking yourself a number of questions, such as whether or not you should try to handle all of your tax-related matters yourself as well as how can you reduce your company’s chances of being audited by the IRS? Here are some tax preparation tips for small businesses to help you on your way.

Make the Most of It

It is possible to really take advantage of your tax deductions and credits if you make the effort to keep track of them throughout the year. Deductions that you can take into account include items like business furniture, supplies for the office, and start-up expenses.

Invest

You will quickly come to find that keeping track of all the necessary numbers and information necessary for small business tax is time-consuming and demanding. This is why it can be a much better idea to invest in software to do it for you. There is also an array of useful apps available for a fraction of the cost, which can also help to streamline these processes.

Research the Forms

There are a lot of different tax-related forms that you should familiarize yourself with upon first starting your small business. Doing so will save you a lot of time in the future! Most importantly, you’ll want to know which ones are relevant to your business based on its type. For example, sole proprietors will need to attach a Schedule C to their personal income tax return, while corporations will need to use a Form 1120 or 1120S.

Looking for professional assistance when it comes to tax requirements for your small business? Look no further than the experts at Georgen Scarborough Associates PC. Contact us for more details today.

Is Your Non-Profit Board in Compliance with IRS Regulations?

Having proper due diligence when it comes to IRS regulations will minimize the legal liability of board members. Having a financial committee on your board or a 3rd party accounting service can help you to keep up with the records. Board members should have an understanding of IRS regulations and limitations under Section 501(c). Abiding by these regulations, along with filing proper documents, will help an organization stay in compliance with IRS tax-exempt status.

How Are Nonprofits Monitored, Regulated, and Governed?

Nonprofits can occur damage caused by fraudulent solicitors, financial improprieties, as well as executives and crooked board members. Nonprofits can engage in revenue-generating activities that result in annual surpluses or profits. Nonprofits must reinvest surpluses back into the organization and its tax-exempt purpose. Excess revenues may not be distributed to individuals affiliated with the organization.

Ideally, the founders and/or persons who oversee the operation of your Nonprofit serve as its board members. In most states, one person may serve as the sole director for incorporation purposes. However, when submitting a 501(c)(3) application or another type of tax-exempt application, the IRS almost always requires at least three distinct individuals to serve on the board of directors. 

Is My Organization Tax Exempt Once I File My Nonprofit Articles of Incorporation?

No. Nonprofit status is granted by your state but tax-exempt status is granted at the federal level by the IRS. You must complete a separate IRS application to be granted tax-exempt status at the federal level.

Can I Still Be A Nonprofit If I Don’t Apply For Tax Exempt Status?

Yes, you are a nonprofit corporation once you are filed with the state. However, your corporation will still be liable for federal (and possibly state) income taxes. Donations made to your nonprofit will not be tax deductible without tax-exempt status. Further, it may also be difficult to obtain grants if you are not a 501(c)(3) organization.

Does the IRS Require Salary Information for Tax-exempt Status Applications?

The IRS wants to know what percentage of the overall budget is devoted to salaries. If salaries are large, the IRS may determine the Nonprofit is actually benefiting the salaried directors, not the Nonprofit’s programs. The IRS wants to see how much each board member is paid. Nonprofit applications must justify why these directors are being paid this amount. If the amount is too high, the IRS will probably ask you to provide justification for the salaries.

People who are being paid by the Nonprofit are also considered “interested” persons. If a majority of the board members are compensated, the IRS perceives a risk of pay increases spiraling out of control.

How Much Does It Cost to Submit My Tax Exempt Status Application to the IRS?

The IRS charges a one time fee to review and approve your application. The filing fee is based on your projected budget. If you expect annual revenues of $10.000.00 or less in your Nonprofit’s first three years, the filing fee will be $275.00. For an organization whose projected revenues exceed $10.000.00 per year, the filing fee will be $600.00. The IRS may still ask you to pay the higher filing fee based on their review of your budget and proposed activities. If your budget and activities do not match, the IRS will instruct you to revise and resubmit your application with the higher filing fee.

 Georgen Scarborough Associates, PC for Your Accounting Needs

At Georgen Scarborough Associates, PC we have never wavered from our commitment to give each client the personal attention they deserve. We also utilize the latest in technology for financial and accounting services, including NetClient CS. This secure online software package puts write-up, trial balance, tax, and accounting software on a single platform, creating powerful password-protected connections with our clients. It’s a tested, proven approach that combines powerful functionality and unprecedented collaboration capabilities into an unparalleled package.

For more information on IRS Regulations for your non-profit organization, contact us today.