Category Archives: Tax Debt

What Does Obamacare Mean For Your Tax Future?

Obamacare TaxesThe implementation of the Affordable Care Act continues to move forward. Failing to adjust withholding strategies and medical expenditures may result in added tax liability. What do the increased cost of healthcare and decreased deductions mean for you and your family? Here are some of the most significant changes to tax laws under the Affordable Care Act.

Higher Taxes on Investment Income

If you derive a significant percentage of your income from investments, you can expect somewhat higher taxes for the 2013 fiscal year. This typically applies to individuals who earn more than $200,000 and married couples who make over $250,000 jointly. Most other investors and taxpayers will see little or no change in the rate of taxation for their income-producing investments.

Upper Income Brackets Will See Medicare Tax Increases

Payroll taxes are often overlooked by individuals when considering their overall tax liability. Since these taxes are taken out of paychecks before workers receive them, changes in these rates can easily go unnoticed. However, couples who earn more than $250,000 jointly may get an unpleasant surprise at tax time: An increase in Medicare hospital taxes of nearly one percent may not be withheld by employers who are unaware of the joint income levels of the married couple. High-earning married couples may be responsible for any amount due that is not withheld as payroll taxes.

Reduced Deduction Percentages for Medical Expenses

Prior to the implementation of the Affordable Care Act, individuals could deduct their medical expenses if those expenses reached 7.5 percent of their adjusted gross income. That figure has now risen to 10 percent, reducing the availability of these deductions for rich and poor alike.

Changes to Flexible Spending Accounts

For 2013, only the first $2,500 deposited into flexible spending accounts (FSAs) will be tax-free. All other deposits will be liable to the regular tax rates applied to other earned income. As a result, many firms are now implementing limits of $2,500 on FSAs to eliminate the need for specialized W-2 forms and to protect their employees against potential financial liabilities when tax time rolls around once more.

New Taxes on Durable Medical Goods and Devices

The Affordable Care Act requires a new excise tax on medical devices including braces, gloves, pacemakers, nebulizers and many other items of medical equipment. While this new tax will not affect patients directly, it is likely to increase the costs of these items and may shift a greater percentage of the financial burden for advanced systems to the private individual as medical supply companies adjust their rates to make up for these added costs.

What You Can Do

Making the necessary changes to withholding, FSA contributions and other healthcare-related activities can help consumers manage the new requirements of the Affordable Care Act and can provide an added level of defense against increased taxes and reduced services in the medical arena. Make sure you consult with experienced and qualified tax experts who can advise you on the latest tax-related changes and help you navigate them.

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Tax Help 101: Casualty, Disaster, And Theft Losses

Tax Help 101: Casualty, Disaster, And Theft Losses

Internal Revenue Service (Photo credit: LendingMemo)

You never know when problems can occur, and this year people have experienced their fair share of unexpected problems.  This summer alone people across the country are dealing with blazing wildfires, destructive storms with dangerous winds, and other natural disasters.  Some people are lucky and come out of the damage relatively unscathed, but others aren’t as fortunate.  Some people have had significant damage done to their property, and they’re trying to find a way to rebuild.  There are also some people that aren’t dealing with disasters caused by nature, they’re dealing with problems caused by other people. Theft of expensive objects, damage done by vandals, blackmail, and other problems happen to people every day.

Many people don’t know what to do when disaster occurs. People with insurance may be able to get some help from their policy, but some policies don’t have enough coverage to completely compensate the policy holder for their loss.  Luckily for tax paying American citizens, Uncle Sam has measures in place to help people in their hour of need. Financial losses incurred because of casualty, disaster, and theft losses may be tax-deductible. Tax payers can report casualty and theft can be reported on Form 4684 and Form 1040 Schedule A.

Casualty Losses

A casualty is defined as the loss, significant damage, or destruction of property because of a sudden event.  In order to claim property as a casualty cost, the event that caused it must be easily identifiable and unexpected.  Natural disasters like floods, earthquakes, storms, and wildfires fit the criteria, but Mother Nature doesn’t have to be the only cause of your loss.  Losses due to car accidents, terrorist attacks, and vandalism can all be claimed as a casualty loss.

Theft Losses

The IRS’ definition of theft isn’t too different from what law enforcement officials view as theft of property.  The IRS defines theft as “the taking and removing of money or property with the intent to deprive the owner of it. The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent.”  According to the IRS embezzlement, robbery, blackmail, burglary, extortion, larceny, and even kidnapping for ransom all full under the umbrella of theft losses.

Losses You Can’t Claim

The government offers IRS tax help to taxpayers that have experienced hardship, but there are some situations where you won’t be able to claim the property and finances you lost over the year.  Property that was misplaced cannot be claimed as a loss, nor can property that was accidently broken.  Tax payers may also not claim any property that has gone through progressive deterioration.  In order to be tax-deductible the damage must be cause by a sudden and unexpected event.  As an example, if your home was significantly damaged in a storm you would be able to claim that.  If your home was damaged because of termite infestation or mold over a period of time, you would not be allowed to claim that.

*Not a solicitation for legal services*

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5 Popular Business Destinations For Tax Havens

5 Popular Business Destinations For Tax Havens

Monaco (Photo credit: Pirotek)

Business Destinations For Tax Havens: Taxes can often prove to be rather annoying expenditures that Government enforces on its people. Unfortunately there are different types of taxes which are applicable to different scenarios and businesses can often face various forms of taxes as their business grows and expands. While there are many tax deductible items, they’re not much so many businesses might face an ever growing amount of taxes for each year.

Fortunately, businesses now have a little trick up their sleeves and look for business destinations for tax havens. These little havens are governed under various governing bodies that don’t always have the same amount of tax. However, tax havens have a special quality and that is that they have almost no form of taxation. Furthermore, businesses have no obligations to reveal any information which is related to their tax payments or bank accounts.

However, the following 5 business destinations for tax havens are extremely popular and many businesses are tempted by them:

Panama

With a well developed commerce and banking sector, the picturesque city of Panama is not just loved for its famous canal. Considered to be among the best business destinations for tax havens, Panama has been popular for well over a decade now. Although it still has some laws ensuring tax payments from all business ends, Panama has become a business tax haven for many local and international businesses and organizations. These businesses in turn have greatly boosted Panama’s banking sector and go for it.

The Cayman Islands

Falling under British rule, these little clustered islands are considered to be more of a tourist destination; the Cayman Islands have started garnering popularity as a great tax haven for many businesses. Its lack of income tax, corporation tax and capital gains taxes has made it one of the first places that any business chooses. With the availability of various international banks as well, the Cayman Islands is a popular place. However, there is a rumor that there has been a Community Enhancement Fee which works like a tax for the people. Find out more information about Cayman Islands offshore company regulations

Luxemburg

A pretty exotic location that is a large popular tourist attraction, Luxemburg favors business endeavors with it’s easy to keep laws and high GDP that attracts businesses towards it. Already crowned as the second largest financial hub in Europe, Luxemburg enjoys numerous local and international businesses. Capitalizing on a large number of foreign banks, Luxemburg has money storage systems. Even after Luxemburg adopted the OECD standards the policies of Luxemburg have hardly changed from its former tax evasive ways.

Monaco

Surrounded near France, Monaco’s claim to fame had been the Formula One race courses but it increasingly became a favorite among many multimillionaires and their businesses. Although there are other taxes in place, there is no income tax and no inheritance tax. While still ideal for businesses, Monaco has increasingly become more favored for millionaires through this little loophole. In fact, Monaco also has a rather extensive international banking sector which houses billions of tax free revenue.

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Connecting With Tax Experts Via Video Conference

Tax preparation help at the library

Tax preparation help at the library (Photo credit: Newton Free Library)

Filing your income taxes is one of those necessary evils that nobody looks forward to. It’s a time consuming, highly detailed process that typically requires several hours of your attention. Luckily, in today’s digital world, filing your taxes doesn’t have to be such a headache. Thanks to advances in technology, you can now work with an accountant to file your taxes from the comfort of your own home. There are a couple of different options for electronic filing that help you to save time and money when you’re doing your income taxes.

Virtual accounting

Let’s face it: we’re all busy and sometimes we just don’t have the time to sit through an hours-long appointment with a tax preparer. When you add in the time spent commuting across town and finding parking, in-person meetings can really start to add up. A number of firms out there that now offer virtual income tax preparation. Some even provide online drop off service, so that you can simply send all of your tax documents in electronically without ever setting foot in a physical office. Nothing is more convenient than that.

You can either choose to work with a large tax preparation service like H&R Block, or an accountant in your area that offers virtual tax preparation services. It’s simply a personal choice based on your comfort level and preferences. Either route you choose, it’s likely you will need to have some face time with your accountant. This can be done in a few different ways. The most common way to connect is through video conferencing that’s done via the web. Some accountants will also connect with you over the phone or through a chat feature that is offered on their website.

Scheduling time to talk via video conference, phone, or live chat ensures that your taxes will be prepared according to your needs and preferences. Generally, filing your income taxes virtually requires a simple conversation at the beginning of the process in order to hammer out necessary details before your accountant gets down to the nitty-gritty of doing your taxes. You then converse by email or phone if there are questions during the process or after the return has been prepared.

Tax preparation software

An estimated 81% of people in the United States filed their taxes electronically last year. While virtual accountants are starting to become more prevalent, it’s likely that the bulk of these individuals used tax preparation services to simplify the filing process. Tax preparation software has seen a surge in popularity over the past decade, with the development of popular programs like TurboTax by Intuit which allow you to complete the filing process online from start to finish.

The program’s popularity is largely attributed to its convenience. TurboTax provides an inexpensive, easy to follow, and convenient solution for filing your income taxes. You can simply download the software or purchase it at a nearby store, run it on your computer and begin entering information from your W-2s and other tax forms. It simplifies the deduction process by taking you step by step through common (and uncommon) tax deductions. Generally, the software helps to maximize your return because it covers all the bases with tax deductions.

If you don’t finish doing your taxes on TurboTax in one sitting, you can always come back to them. The program saves your progress online or on your computer, so you can simply pick up where you left off. Once you’ve completed your tax returns, you can file with the click of a button and opt to receive your refund electronically, or via paper check in the mail. You can also pay your taxes electronically if you end up owing money. It’s a highly convenient solution with little margin for error, and a great choice if you are not particularly confident in your skills when you’re filing taxes on paper.

Thanks to today’s technology, there are a few great ways to minimize the hassle of filing your income taxes, including Intercall’s virtual events and other tech options. If you would like to explore a more convenient solution for filing, look into options for virtual accounting or consider purchasing tax preparation software to simplify the process. Tax software will save you a lot of time and potential frustration!

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The 5 Biggest Differences Between Tax Preparers And Tax Attorneys

Money

There’s an accounting joke (yes, they exist) that goes like this:

Q: What is a CPA?

A: It’s someone who solves a problem you didn’t know you had in a way you don’t understand.

Even if that joke doesn’t make you laugh, it does contain an interesting bit about the necessity of a tax professional.  The IRS certainly isn’t your friend, but it also isn’t your enemy. It is an organization operating on a mind-numbing system of complexities, the kind most people just aren’t cut out to navigate. The truth is, if you have a business of any size, you need professional help with your taxes. This comes in the form of tax preparers, enrolled agents, CPAs and tax attorneys.

If you’re as confused by the line-up as me, here’s a little clarity on the biggest differences between the bottom and top of the totem pole.

 

1.     Education:

Tax preparers are trained in the general structure of tax returns. The majority of preparers are educated by whatever franchise they work at (H&R Block, Jackson Hewitt, Liberty Tax Service). Independent preparers may attend tax preparer courses, but no formal training is needed to start a practice.

Tax attorneys must obtain a specialized law degree.  Beyond the basic degree, many tax attorneys obtain a Master of Laws degree in taxation as well as a mandatory Juris Doctor degree. In addition to this rigorous education, specialized courses are required covering advanced topics in business taxation. Many tax attorneys also have experience as certified public accountants.

 2.     Certification:

Anyone can become a tax preparer. On Jan. 18, 2013, the District Court put a stop to IRS requirements for registered tax return preparers to complete competency testing or secure continuing education. In fact, all it takes to offer the public service of tax preparation is the acquisition of a preparer tax identification number (PTIN), which costs all of $64.25.

Tax attorneys must pass the state bar.  After completing the years-long process of law school, tax attorneys must pass the bar exam of whichever state they wish to practice in.

3.     What they can do for you:

Tax preparers are capable of assisting you with basic, straightforward tax returns. If you have no special needs or complications involved in your taxes then a tax preparer is a good call. Whatever choice you make, be sure to ask about the full extent of your tax professional’s capabilities.

Tax attorneys can navigate your tax needs at every possible level. If you run a business and require assistance with complicated tax matters, or need year-round accounting, the seasoned tax attorney is your best bet.  They’ll keep you from getting in trouble with the IRS by guiding you through your finances before tax season and/or representing you in front of the U.S. Tax Court if that’s necessary.

4.     Who should hire them: 

Tax preparers are appropriate help for anyone with an ordinary tax structure.  The ideal client of a tax preparer is an individual with run-of-the-mill tax needs who forgoes the option to fill out taxes themselves. A small business without complicated tax structure can use them also, but it is advisable to seek a more experienced professional. It’s worth noting that chain tax services like H&R Block, Jackson Hewitt, or Liberty Tax Service employ people with varying levels of experience, and it’s a good idea to ask if any CPAs are employed there. If the answer is yes, request to work with them.

Tax attorneys are the choice for anyone with intricate tax needs, or issues with the IRS. If you get audited by the IRS or owe an excessive amount of money ($10,000 or more) you should seek the help of a tax attorney. It’s a good to be proactive and hire a tax attorney for management of a more involved account where a traditional accountant will not suffice. This would include businesses with payroll, international business or estate planning. One option is to turn to a company like Burkett, Burkett and Burkett that staffs experienced CPAs and tax attorneys. These kinds of firms benefit from the shared experience of a group.

 5.     What they will cost:

Tax preparers charge in a number of different ways, but are generally affordable. From independent preparers to franchise services, methods of billing range from flat fees to hourly and scaled fees by level of complexity. The average 2012 price for H&R Block was $192 per return where Liberty Tax Service averaged $173.

Tax attorneys are costly.  We all know that hiring a lawyer is going to cost and a tax lawyer is no exception. You will more than likely be charged an hourly rate and can expect to see them ranging from a few hundred dollars to $1,000 or more per hour.  This is obviously what puts such an emphasis on hiring the right kind of professional. If you don’t require complicated tax services, you may be able to get by with a tax preparer or certified public accountant. However, don’t make the mistake of cutting corners in a situation where potential consequence so greatly outweighs the savings.

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