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!

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.

How Income Tax Deductions Work – Standard Vs. Itemized

With the tax season in full swing, filing your tax return should be at the top of your agenda. While this may seem like a daunting prospect, Georgen Scarborough Associates, PC is here to help. With our extensive knowledge in tax, we hope to shed some light on some of the more complex aspects of filing your tax return. In this case, the difference between standard and itemized deductions as well as when to file which.

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