Avoid These Common Tax Mistakes
Nobody’s perfect. Mistakes happen.
But if you make a mistake on your tax return, it will likely take the IRS longer to process it. That could delay your refund. The best way to avoid errors is to file you taxes at Peoples Tax. Our tax preparers receive thorough employee training and double-check every return to safeguard the accuracy of your tax return.
Here are eight common tax-filing errors to avoid:
- Wrong or missing Social Security numbers. Be sure you enter all SSNs on your tax return exactly as they are on the Social Security cards.
- Wrong names. Be sure you spell the names of everyone on your tax return exactly as they are on their Social Security cards.
- Filing status errors. Some people use the wrong filing status, such as Head of Household instead of Single. Our expertly trained tax preparers at Peoples Tax can help you choose the right status.
- Math mistakes. Double-check your math. For example, be careful when you add or subtract or figure items on a form or worksheet.
- Errors in figuring credits or deductions. Many filers make mistakes figuring their Earned Income Tax Credit, Child and Dependent Care Credit, and the standard deduction. If you’re not e-filing, follow the instructions carefully when figuring credits and deductions. For example, if you’re age 65 or older or blind, be sure you claim the correct, higher standard deduction.
- Wrong bank account numbers. You should choose to get your refund by direct deposit. Be sure to use the right routing and account numbers on your return. The fastest and safest way to get your tax refund is to combine e-file with direct deposit.
- Forms not signed. An unsigned tax return is like an unsigned check – it’s not valid. Both spouses must sign a joint return.
- Electronic filing PIN errors. When you e-file, you sign your return electronically with a Personal Identification Number. If you know last year’s e-file PIN, you can use that. If you don’t know it, enter the Adjusted Gross Income from the 2013 tax return that you originally filed with the IRS. Do not use the AGI amount from an amended return or a return that the IRS corrected.
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Cut Taxes and Save on Energy Bills with Home Energy Credits
You can reduce your taxes and save on your energy bills with certain home improvements.
Here are some key facts that you should know about home energy tax credits:
Non-Business Energy Property Credit
- Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.
- The other part of the credit is not a percentage of the cost. This part of the credit is for the actual cost of certain property. This may include items such as water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.
- This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
- Your main home must be located in the U.S. to qualify for the credit.
- Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.
- This credit had expired at the end of 2013. The Tax Increase Prevention Act extended it to apply for one year, through Dec. 31, 2014. You may still claim the credit on your 2014 tax return if you didn’t reach the lifetime limit in prior years.
Residential Energy Efficient Property Credit
- This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
- Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
- There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
- The home must be in the U.S. It does not have to be your main home, unless the alternative energy equipment is qualified fuel cell property.
- This credit is available through 2016.
Have a question? Want to schedule a tax appointment? Call us at 804-204-1040 or email us.
The Premium Tax Credit – The Basics
If you get your health insurance coverage through the Health Insurance Marketplace, you may be eligible for the premium tax credit.
Here are some basic facts about the premium tax credit.
What is the premium tax credit?
The premium tax credit is a credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace.
What is the Health Insurance Marketplace?
The Health Insurance Marketplace is the place where you will find information about private health insurance options, purchase health insurance, and obtain help with premiums and out-of-pocket costs if you are eligible.
How do I get the premium tax credit?
When you apply for coverage in the Marketplace, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim for the tax year, using information you provide about your family composition and projected household income. Based upon that estimate, you can decide if you want to have all, some, or none of your estimated credit paid in advance directly to your insurance company to be applied to your monthly premiums. If you choose to have all or some of your credit paid in advance, you will be required to reconcile on your income tax return the amount of advance payments that the government sent on your behalf with the premium tax credit that you may claim based on your actual household income and family size.
What happens if my income or family size changes during the year?
The actual premium tax credit for the year will differ from the advance credit amount estimated by the Marketplace if your family size and household income as estimated at the time of enrollment are different from the family size and household income you report on your return. The more your family size or household income differs from the Marketplace estimates used to compute your advance credit payments, the more significant the difference will be between your advance credit payments and your actual credit.
Top Eight Tax Tips about Deducting Charitable Contributions
When you give a gift to charity that helps the lives of others in need. It may also help you at tax time.
You may be able to claim the gift as a deduction that may lower your tax. Here are eight tax tips you should know about deducting your gifts to charity:
- Qualified Charities. You must donate to a qualified charity if you want to deduct the gift. You can’t deduct gifts to individuals, political organizations or candidates.
- Itemized Deduction. To deduct your contributions, you must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with your federal tax return.
- Benefit in Return. If you get something in return for your donation, your deduction is limited. You can only deduct the amount of your gift that is more than the value of what you got in return. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.
- Donated Property. If you gave property instead of cash, the deduction is usually that item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market.
- Clothing and Household Items. Used clothing and household items must be in at least good condition to be deductible in most cases. Special rules apply to cars, boats and other types of property donations.
- Form 8283. You must file Form 8283, Noncash Charitable Contributions, if your deduction for all noncash gifts is more than $500 for the year.
- Records to Keep. You must keep records to prove the amount of the contributions you made during the year. The kind of records you must keep depends on the amount and type of your donation. For example, you must have a written record of any cash you donate, regardless of the amount, in order to claim a deduction.
- Donations of $250 or More. To claim a deduction for donated cash or goods of $250 or more, you must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether the organization provided any goods or services in exchange for the gift.
Have a question? Want to schedule a tax appointment? Call us at 804-204-1040 or email us.
Small Business Corner
Six Tips You Should Know about Employee Business Expenses
If you paid for work-related expenses out of your own pocket, you may be able to deduct those costs.
In most cases, you claim allowable expenses on Schedule A, Itemized Deductions. Here are six tax tips that you should know about this deduction.
- Ordinary and Necessary. You can only deduct unreimbursed expenses that are ordinary and necessary to your work as an employee. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is appropriate and helpful to your business.
- Expense Examples. Some costs that you may be able to deduct include:
- Required work clothes or uniforms that are not appropriate for everyday use.
- Supplies and tools you use on the job.
- Business use of your car.
- Business meals and entertainment.
- Business travel away from home.
- Business use of your home.
- Work-related education.
This list is not all-inclusive. Special rules apply if your employer reimbursed you for your expenses.
- Forms to Use. In most cases you report your expenses on Form 2106 or Form 2106-EZ. After you figure your allowable expenses, you then list the total on Schedule A as a miscellaneous deduction. You can deduct the amount that is more than two percent of your adjusted gross income.
- Educator Expenses. If you are a K through 12 teacher or educator, you may be able to deduct up to $250 of certain expenses you paid for in 2014. These may include books, supplies, equipment, and other materials used in the classroom. You claim this deduction as an adjustment on your tax return, rather than as an itemized deduction. This deduction had expired at the end of 2013. A recent tax law extended it for one year, through Dec. 31, 2014.
- Keep Records. You must keep records to prove the expenses you deduct.
- File your taxes at Peoples Tax. No business tax returns are too complex for our tax experts. Nationally-known as a leader in tax education, Peoples Tax is always on the cutting edge of what is happening in the industry. Your business tax returns will be prepared accurately and in a timely manner. In addition, we will provide you with tax planning to minimize your taxes in the future. Your small business tax return will be prepared and e-filed with the top income tax preparation software, and is backed by our Triple Guarantee, which ensures our accuracy, year-round assistance and satisfaction.
Have a question? Want to schedule your Free 1 hour consultation to learn how our tax preparation services can help your business? Call us at 804-204-1040 or email us.
Top Six Tips about the Home Office Deduction
If you use your home for business, you may be able to deduct expenses for the business use of your home.
If you qualify you can claim the deduction whether you rent or own your home. If you qualify for the deduction you may use either the simplified method or the regular method to claim your deduction. Here are six tips that you should know about the home office deduction.
- Regular and Exclusive Use. As a general rule, you must use a part of your home regularly and exclusively for business purposes. The part of your home used for business must also be:
- Your principal place of business, or
- A place where you meet clients or customers in the normal course of business, or
- A separate structure not attached to your home. Examples could include a garage or a studio.
- Simplified Option. If you use the simplified option, you multiply the allowable square footage of your office by a rate of $5. The maximum footage allowed is 300 square feet. This option will save you time because it simplifies how you figure and claim the deduction. It will also make it easier for you to keep records. This option does not change the criteria for who may claim a home office deduction.
- Regular Method. If you use the regular method, the home office deduction includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid may qualify. If you own your home, part of the mortgage interest, taxes and utilities you paid may qualify. The amount you can deduct usually depends on the percentage of your home used for business.
- Deduction Limit. If your gross income from the business use of your home is less than your expenses, the deduction for some expenses may be limited.
- Self-Employed. If you are self-employed and choose the regular method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You can claim your deduction using either method on Schedule C, Profit or Loss From Business. See the Schedule C instructions for how to report your deduction.
- Employees. If you are an employee, you must meet additional rules to claim the deduction. For example, your business use must also be for the convenience of your employer. If you qualify, you claim the deduction on Schedule A, Itemized Deductions.
Have a question? Call us at 804-204-1040 or email us.