2015 Health Insurance Penalty

The 2015 health insurance penalty  for persons not covered by health insurance  has increased significantly. When the health insurance  penalty  rolled out in TY 2014,  it  was $95 per person or 1% or their income.  The  penalty  for TY 2015 $325 per person or 2 percent of their income.  Persons eligible  for one of the  many exclusions may required to apply for a certificate from the state or federal marketplace and present the certification when preparing  TY 2015 return.

Tax Deduction - Business Mileage

Does your employer require you to travel for work using your car? If your employer does not reimburse you for this work-related expense, you can claim the business mileage  deduction on your tax return. The  standard mileage rate  for TY 2015 is  57.5 cents per business mile driven.  You can only claim mileage driven from one  work location to another work location, do not include commuting miles.

Payroll and Tax Services

Payroll

• Calculate Employee Payroll and Withholdings
• Issue Employee Paychecks
• File Payroll Taxes to EFTPS 
• Issues W-2s at year-end
• Manage new hire paperwork

Tax

• Sales Tax Returns
• Payroll Tax Returns
• Individual Federal Tax Returns &State Tax Returns
• Sole Proprietorship Tax Returns
• Single Member LLC tax returns
• IRS letter correspondence
• Order Wage &Income Transcripts

Admin. Services

• Virtual Administrative Assistant Services
• Accounts Receivables and Collections

Tax Charm -Your Tax Return in Good Hands

Created to address the needs of taxpayers,  Tax Charm is an income tax preparation business serving clients in Michigan, Texas and nation-wide.

 Tax Charm has years of experience in the tax profession industry working with clients with various types of income including: employment, self-employment, investment, inheritance, stock options, rental property, investment, and K-1 income. 

We are committed to ensuring every client receive every tax credit and every tax deduction they are entitled to. 

Refer new clients, receive  $50 for each new client. ( referral fees paid for tax return over $150, after tax return is fully paid for)
  
**Additional Services: Past -year tax returns, IRS letter resolution, Order Wage and Income Transcripts, Book-keeping**

Employee vs. Independent Contractor

It is important for companies to know the difference between what makes someone an employee vs. an independent contractor. Companies are responsible for paying social security taxes, medicare taxes and unemployment taxes on wages paid to an employee. Companies are not responsible for paying these taxes on money paid to an independent contractor. The independent contractor is responsible for paying the self-employment tax (15.3%) in addition to the ordinary tax. Companies may think they are coming out on top and saving money on taxes by misclassifying workers.  There can be tax and  legal trouble for a company if a  worker is misclassified.

Employees vs. Independent Contractors

•  Employees are dictated by employer what hours to work and how to do the job.
•  Independent contractors make their own schedules and have more flexibility in how they complete work projects. 
•  Employees are paid by salary or hourly
• Independent contractors are usually paid by project, not by hour. 
•  Employees usually only work for one company.
•  Independent contractors may work for various companies. 
• Employees work expenses are covered largely by the company.
• Independent contractors pay out of pocket for business expenses. 
• Employees receives fringe benefits such as vacation, sick pay and health benefits
• Independent contractors do not receive fringe benefits. 
• Employees receive a W-2 at end of tax year.
• Independent contractors receive a 1099 - MISC  

This is not an all- inclusive list of the differences between an employee and an independent contractor.

Please refer to the IRS website for further information on classifying workers.

Think taxes year round - Small Business Owners

To save  money in taxes, have a successful business and/or avoid an IRS agent from knocking at your door, think about taxes year round. This rings especially true for small business owners, business income is taxed at a higher tax rate.  Self- employment income is imposed the self-employment tax of 15.3% and the ordinary income tax rate.

Tax Tips for the Self- Employed

1. Car expenses- If you use your automobile for business , you may be able to write the expenses off.  Use either the actual expense or standard mileage method. Usually, the standard mileage method is more advantageous, depreciation is included in standard mileage rate. For TY 2013, the standard mileage rate is 56.5 cents per mile. If you drive 10,000 business miles , $ 5,650  can be  deducted from your business income, a huge tax savings.

2. Business use of home-   Taxpayers with  a  home office may be able to take the home office tax deduction.Calculate business use percentage by dividing the square footage of your home office by the square footage of your home.  Home expenses are ten multiplied by the business use percentage to figure deductible expenses. Utilities, home repairs, insurance, home mortgage interest,  rent , property taxes qualify for home office tax deductions.
  In order to take the deduction, the area must be exclusively used for business.  If you let an overnight guest sleep in your home office, you are no longer eligible for your tax deduction.

3. Depreciation - Depreciation for office equipment and business asset are tax -deductible expenses. Additionally, taxpayers with a home office can deduct home's depreciation based on the business use percentage.

4. Interest - Taxpayers who borrow money to finance a business may be able to claim a tax deduction for interest paid on the loan.

*Tax Charm blog is not to be used for legal or professional advice.

Small Business Owners Tip - Personal Matters and Business don't mix

Congrats on your new journey as a business owner. The best times are ahead, challenges are also ahead. Start off on the right track by establishing a separate entity for your new venture. A LLC (limited liability company)  is  one option that creates a separate identity for your business.  Setting up a LLC can  protect your personal assets  from seizure  in the case your business is sued.

Establishing a LLC is  one step.  It's still your responsibility  to keep your personal income separate from your business entity and to keep up the tax filings and legal requirements of operating a LLC. One requirement of  a LLC iowner is maintaining a business bank account. The Business bank account should only be used for  Business income and expenditures.

To withdraw money from the business to pay yourself, you can take an owner's draw.

Commingling  business income and personal income will forfeit the protection the LLC provides for If you choose not to incorporate your business, it is still a great practice to differentiate your business income from personal income. The advantages include businesses' profit/losses are easier to compute,   less likelihood of an IRS audit,  and loans approval odds increase.

I recommend all new business owners and those thinking of going in business for themselves to seek help from cpa, lawyer ,and/or professional tax advisor. This will save you a lot of headaches in the end.

Being a successful business owner takes more than talent and creativity, it takes resources and tapping into a network of  professionals.

*TaxCharm blog is not legal advice.  It is meant for informational purposes only.*

Tax Office Marriages " I now pronounce you man and wife."

There are occasions when taxpayers in common-law marriage states, such as Texas, file Married Filing Jointly with live- in mates.

If you live in a common law state and file a joint tax return with your live in lover, you are are now married, whether you go throught the official proceeding or not. This will make it more may be difficult to walk away if you break up .You may have to seek a formal divorce and your former lover could possibly have rights to some of your assets. 

Legally, once a common law marriage has been established, there is no difference between a common law marriage and a ceremonial marriage.

Before you make an instant decision in a tax office that could change your life forever, ponder if you want to be married to this person and want them to have legal right to your assets

If you marry in the tax office, your  significant other may want a ring with your tax refund.

Places where common- law marriages can still be contracted: 9 states(Alabama, Colorado, Kansas, Rhode Island, South Carolina, Iowa, Montana, Utah and Texas) and the District of Columbia.

* Note: If you live in a common law state and  you and your live in lover introduce yourselves  as husband and wife, then you may legally be obligated to file tax return as married. You may be in violation of  IRS regulations if you file single or head of household after presenting yourself to be married.


Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.

Help! The IRS took our tax refund for my spouse's past due child support.

This is a common situation that is seen frequently in tax offices all across America.  Either, the spouse is  afraid to file with their significant other due to fear of refund being applied towards past due debt  or the spouses file together and neither  one gets any of the tax refund.

Most people tried to avoid this by filing Married Filing Separately. This is not  a good alternative.  Married Filing Separately  disallows you from claiming any tax credits. Tax Credits you may be missing out on are Earned Income Credit, Child Tax Credit, Education Credit, Child Care Credit, and Retirement Savings Contribution Credit.

Instead of robbing yourself of free money, you can file Married Filing Jointly then submit an Injured Spouse Allocation form. This way you can help pay off some of your spouse's debt and get your portion of the refund back from the IRS.

You may be entitled to injured spouse relief if you file a joint return and all or part of your refund is applied against your spouses’ past-due federal tax, state income tax, child or spousal support or federal nontax debt, such as a student loan.

 For the IRS to consider you an injured spouse, you must have made and reported tax payments, such as federal income tax withheld from wages or estimated tax payments, or claimed a refundable tax credit, and not be legally obligated to pay the past-due amount.

Please keep in mind that you are not entitled to Injured Spouse Relief if the amount owed is due to debt you are responsible for. It has to be only your spouse's debt.

Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.









 

What are the filing requirements for Tax Year 2013?

• If you made over $400 as self-employed person, you are required to file and pay self employment taxes. 

       You are self-employed if you are fall in any of the following groups: You are an independent contractor, a sole proprietor, a member of a partnership, or are in a business for yourself in any other way.)

• Filing Requirements for most taxpayers.

Filing Status	Minimum Gross Income (under 65)	Minimum Gross Income (65+)
Single	$10,000	$11,500
Head of Household	$12,850	$14,350
Married Filing Jointly	$20,000	$21,200 (one spouse) $22,400 (both spouses)
Married Filing Separately	$3,900	$3,900
Widow with Dependent Child	$16,100	$17,300

• Church employees who are paid more than $108.28 in wages not subject to Social Security or Medicare taxes are also required to file.

• Children and Dependents are required to file if they make m
  
  Tax Charm blog is not legal or professional advice.
  
  You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.
  
  I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.
  
  
  
  ore than $1000 in unearned income (ie, interest, dividends) or $6100 in earned income.

Am I required to file Income Taxes?

 Not everyone is required to file taxes. If an individual's income does not exceed the standard deduction amount plus one exemption and he/she is not a dependant to another taxpayer, he/she may be exempt from the requirement to file income taxes.

 A person may not be required to file income taxes for 2012 tax year if their income is less than $9750. 

A dependant of another taxpayer is required to file taxes for 2012 if the dependant's  income is more than $5950.


Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.


 

Money today, not tomorrow. Offsetting Payroll Tax Hike.

Paychecks are smaller for most Americans in 2013. The smaller paychecks result from the
expiring of payroll tax holiday. In 2010, we received a break from the government, social security taxes were reduced from 6.2% to 4.2%.  The tax break expired at end of 2012.  Our two year break is up, social security taxes are back up to 6.2%.

One way you can counter the payroll tax hike is to  increase your exemptions on your W-4. I don't know about you, but I would much rather have my money now than later. The present time value of money idea tells us future dollars are not worth as much as dollars today.  Let's say you need gas for your car to get to work this week and you are flat broke, having $50 next week is not going to help you .If you can't get to work this week, you may face termination. I bet anyone much rather have the $50 today , and not next Thursday. By the next Thursday, your employer may have already given you the peace sign! 

Decrease your paycheck tax witholding on your W-4, to have  more money this year, instead of next year. In the current state of the economy, even an  extra $50 in a bi-weekly paycheck can make a great difference. Food is expensive, gas is expensive and everything is going up. Stop giving the government an interest free loan.


Brought to you by Tax Charm.Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.

 

TaxCharm blog: 2012 Tax Year Standard Deduction and Exemptions am...

TaxCharm blog: 2012 Tax Year Standard Deduction and Exemptions am...: Standard Deductions for 2012 tax year  Single: $5,950-an increase from $5,800 Married Filing Separately: $5,950.Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.


 

When is the first day to submit 2012 tax returns to IRS?

The IRS pushed back the day they will begin to accept e-filed and paper 2012 tax returns to January 30, 2013.

Brought to you by Tax Charm.
Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.

 

2012 Tax Year Standard Deduction and Exemptions amount

Standard Deductions for 2012 tax year

 Single: $5,950-an increase from $5,800
Married Filing Separately: $5,950, an increase of $5,800
Head of Household: $8,700, an increase from $8500
Married Taxpayers Filing Jointly and Qualifying Widow(er)s: $11,900, an increase from $11,600

Exemptions

This tax year, you can claim $3,800, up from last year's $3700

Get up to date  on  2012 tax year updates at Tax Charm!Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.


 

Financial Aid and Filing Status

"Will I receive more financial aid if I file Married Filing Separately?"

Married filing separately does not offer an individual more financial aid versus married filing jointly. Once you report you are married on your FAFSA, both incomes of the spouse must be reported on the FAFSA. If you are married and report only one person's income, a red flag will be raised.

If your income is higher than the last time you filled out a FAFSA, you will not  qualify for as much need based aid as the last time or you may not qualify for any need based aid. Pell grants and subsidized loans are some examples of need based aid. Depending on your income, you may only qualify for unsubsidized loans. Unsubsidized loans accumulate interest while you are enrolled in school and become more expensive, subsidized loans do not accumulate interest while in school.

Click on this link to see how much financial aid you may qualify based on your new married
income for more specific information.

https://fafsa.ed.gov/FAFSA/app/f4cForm?execution=e2s1
Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.

Fiscal Cliff deal approved! What does this mean for us ?

 Fiscal Cliff Deal  breakdown

 -We will pay  6.2 percent out of payroll checks towards social security instead of 4.2 percent, payroll tax holiday is over

- Income Taxes will only rise on individuals making over $400, 000 and couples making over $450,000 a year, will increase from 35% to 39.6%.

- Investment tax income increased to 20% for those who make over $400,000 a year

-Emergency unemployment compensation extended for a year

-American Opportunity Credit extended for 5 years

-Earned Income Credit extended for 5 years

-Child Tax Credit of $1000 extended for 5 years

-Mortgage Debt Forgiveness extended for another year. So if you are forced into a short sale or foreclosure, you do not have to pay taxes on the amount of loan forgiven.

Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.
 

Paying Back Student Loans and Tax Returns

 A favorite topic of  mine is financial aid, specifically student loans.  Recently, I consolidated my student loans and applied for the income based repayment plan.

 If you owe student loans , and need advice on consolidating and different repayment plans, feel free to send me a message. I worked in financial aid and I am successful in managing my student loans .

Recently, I talked about Married Filing Jointly vs. Married Filing Separately. I will like to add a benefit of filing Married Filing Separately. If you owe student loans and are in repayment , it may be advantageous for you to file Married Filing Separately. This may save you thousands and thousands of dollars over your lifetime.

 If you file Married Jointly, your student loan repayment plan is based on  your income and your spouse's income.  The  combined incomes may  disqualify you for the income based repayment plan and your student loan payments could be significantly higher than if you have not married.

Filing Married Filing Separately may decrease your student loan  payments by  thousands of dollars each year. You may potentially qualify for the income based repayment plan.
 an example of how filing status may affect your student loan payments:

You owe $60,000 in student loans. You make $39,000/year and your spouse makes $63,000/yr.

If you file married filing jointly with your spouse, your student loan payment will be based on $102,000 of yearly income. You will disqualify from the income based repayment plan , you will instead qualify for the standard based repayment plan and will pay $690 a month.

If you file married filing separately, your student loan payment will be based only on your income of $39,000. You will qualify for the income based repayment plan and will pay $130 a month.

 Filing married filing separately will save you $560 a month, that's $6720 a year!

If you want more information, please feel free to comment on  TaxCharm.
Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.

Married Filing Jointly vs. Married Filing Separately

Welcome back to Tax Charm, I hope everyone had a beautiful Christmas!

 Married Filing Jointly (MFJ) vs. Married Filing Separately (MFS) is the topic I will discuss in today's post.  This is a very popular question . My married girlfriends call me up and  tell me they want to file Married Filing Separately because their husband makes too much money. I usually advise them against filing separately.  The Married Filing Separately status robs people of a vast amount of tax benefits, the IRS wants all married couples to file their taxes together. There are only a few amount of circumstances in which I would advise a person to file MFS. I will discuss these at the end of my post.The number one circumstance I will advise someone to file MFS  if he/she owe  federal student loans and are in repayment( discussed in next post).

The following  tax benefits are  disallowed by the IRS if one files Married Filing Separately:

•  Earned Income Credit
• Child Tax Credit
• American Opportunity Credit or Lifetime Learning Credit
• Child and Dependent Care Credit
• Tuition and fees deduction
• Student loan interest deduction
• Tax-free exclusion of US bond interest
• Student loan interest deduction
• Tax-free exclusion of US bond interest
• Tax-free exclusion of Social Security benefits
• Credit for Elderly and Disabled

 
Also, if one spouse itemizes deductions, the other spouse would also have to itemize. This tax rule holds true even if the other spouse has limited expenses to itemize. The spouse would be forced to itemize although it would be more beneficial to take the standard deduction.

So ,if you qualify for any of the above tax credits , File Jointly with your Spouse.


There are only a few instances when it makes since to file Married Filing Separately.

•   You suspect your spouse is evading taxes and you don't want to be held responsible
•  One spouse has a significant amount of medical expenses
•  Great amount of personal casualty losses incurred by one spouse (deductible only to the extent they exceed 10% of AGI).
•  A vast amount of un-reimbursed employee business expenses,  tax advice fees and preparation, and investment expenses that are incurred by one spouse (deductible only to the extent they exceed 2% of AGI).
• You are repaying federal student loans

When in doubt, work the numbers both ways, Married Filing Separately and Married Filing Jointly. Do this to find the tax situation in which the couple owes the less money or gets the most money back.

That's all folks!

Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.
 

“Tax Us, We Don’t Mind.” Celebrities and a CEO who want to pay Higher Income Taxes

Warren Buffet says he wants to pay higher taxes. While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks," Warren Buffet writes.

What’s a few billion to 46 billion? Warren Buffet pays an effective rate of 27.9% tax rate, while he says his secretary makes $60, 000 and pays a tax rate of 30%. Although If I was Billionaire Warren Buffet’s secretary, I would be asking for a raise…..

Jay-Z He says “Obama Can Tax Me.”  Jay-Z does not mind paying higher income taxes if it goes to education and poverty.
 
Jay, we got 99 Problems and Mitt Romney ain't one! I can say that with my chest now.

Eva Longoria "The Eva Longoria who worked at Wendy's flipping burgers -- she needed a tax break,” Longoria told the crowd at the Democratic National Convention. "But the Eva Longoria who works on movie sets does not."

 Right on Eva! Eva has a net worth of 35 million. While the average 2012 Wendy’s worker makes $7.25 an hour and has a net worth in the negative.

JP Morgan Chase’s CEO Jamie Dimon CEO Dimon supports paying 39.6 percent in taxes, up from what Dimon paid last tax year. Dimon also said he might back an increase in the capital gains tax rate to around 24 percent from 15 percent, a proposal by President Barack Obama, for people making above $250,000.

Ben Affleck "I don't know, you know, what your nut looks like," Ben Affleck said to O'Reilly, "but I don't spend so much that I can't afford to pay a little bit more in taxes."

Will Smith says he is very supportive of President Obama's proposal of increasing taxes on the wealthy?"America has been fantastic to me. I have no problem paying whatever I need to pay to keep my country going."

Chris Rock  " I’ll pay higher taxes," Chris Rock told the Associated Press. "I look at it this way: I can pay higher taxes and people can have jobs, or I can pay lower taxes and I have my kid’s teacher asking me for a loan because she’s going to lose her house, which is true,” “So I’m going to lose the money no matter what."

Mind you, this conflicts with what Chris Rock said on the YouTube videos. However, that was the Comedian Chris Rock relating his comedy to us not so rich folks.

  So readers,  there you all go, there are rich Americans who don’t mind higher taxes. Some of the wealthy and more fortunate American citizens consider paying higher taxes as giving back and making the United States go round!!


  “I’m thankful for the taxes I paid because that means I’m employed” Nancie J. Connelly