MONEY SOLUTIONS Copyright 2014 The Valley News & The Herald-Journal February 2014
Charitable Donations Guidelines to follow
Earn a Bigger Tax Refund
How to Prepare for Tax Time
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Charitable donations and tax deductions People make charitable donations for various reasons. Some are motivated by a desire to give back to their communities, while others may be inspired by a particular cause whether that cause is based down the street or across the globe. Network for Good, an organization that helps nonprofits connect with prospective donors, says 89 percent of American households give to charity. Gifts average 3.2 percent of household income, or roughly $1,620 annually, and oftentimes such donations are tax deductible. The Canada Revenue Agency and the United States Internal Revenue Service are the organizations tasked with overseeing tax-related issues. In-depth information regarding applicable tax deductions can be found on their respective Web sites,www.cra-arc.gc.ca and www.irs.gov. Individuals also consult with a qualified accountant should they have any questions regarding charitable donations and deductions. In addition, there are some guidelines for donors to follow when making donations and claiming tax deductions. • Recognize that only charitable contributions made in the calendar year are potentially eligible to be claimed as deductions. For example, only those donations made between
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January 1, 2013 and December 31, 2013 can be claimed on your 2013 tax returns (filed in 2014). Therefore, if you’re hoping to deduct donations as soon as possible, do your giving before the end of the calendar year. • Canadians can only claim charitable donations on their taxes if the charities that benefitted from their donations are recognized as registered charities. A list of registered charities is available on the CRA Web site. Donors also can verify with a charity if they are registered before making donations. • The United States also requires donations be given to a qualified organization for donors to earn a deduction. You cannot deduct contributions made to specific individuals or political candidates and organizations. In general, trusts, foundations, war veteran’s organizations, domestic fraternal societies, churches, nonprofit charitable organizations, volunteer fire companies, and medical research organizations are considered qualified organizations. • Americans also may be able to deduct contributions to certain Canadian charitable organizations covered under an income tax treaty with Canada. But such deductions are typically reserved for those donors who generate income from sources in Canada.
Consult with an accountant concerning contributions outside of the United States. • Fair market value is used to determine the value of clothing or other nonfinancial donations. The CRA defines gifts as goods, securities and land. Special rules may apply to vehicle donations. • It is important to keep receipts for all charitable donations. This helps verify the donation and can be beneficial should donors be audited down the road. You must have a donation receipt in order to claim charitable contributions on Canadian taxes. The receipt should list your name, address, the charity’s registration number, the value of the donation and additional pertinent information. • American donors must file Form 1040 and itemize deductions on Schedule A when deducting charitable donations. Canadians will fill out schedule 9 on their T1 income tax return. Donors can make the most of their good deeds by keeping good records and selecting approved charities before filing their tax returns. Editorial provided from http:// www.metrocreativegraphics.com
Getting ready for tax season
Earn a bigger tax refund next year While many people owe taxes every April 15, many more individuals eagerly anticipate tax season because they know a refund is coming their way. Naturally, you may be interested in learning how to tip the odds in your favor for a larger tax refund check. Deductions can reduce your tax bill, and there are many ways for men and women can earn more deductions. The following are a few tips that might help you earn a bigger refund next year. And if you find yourself struggling with your taxes, be sure to consult with an accountant or financial advisor. • Establish a home office. People who work entirely or partially from home may be entitled to certain tax breaks. You may be able to deduct portions of your home utility bills and maintenance costs. You may also be allowed to deduct business expenses, such as office supplies, equipment, furniture, and phone bills. • Itemize your deductions. Itemize your deductions instead of taking a standard deduction. While this may be more time-consuming and require more paperwork and proof of receipts, itemizing often saves taxpayers a substantial amount of money. Charitable donations, student loan interest, childcare payments, and money paid for points on a mortgage all can be itemized and save money on your tax bill. Talk with a tax professional to figure out the best course of action when it comes to deductions. • Buy a home. Home buyers generally have more livingrelated deductions than renters. There are many tax benefits to owning a home. In some instances, a homebuyer tax credit may be available for first-time homebuyers. Homeowners also may be eligible for certain tax breaks on home improvements. These programs vary from year
to year, and it could be in your best interest to learn which programs are being offered to get a greater tax refund. • Look for a job. Unemployment benefits are taxed when they exceed a certain value. If you’re not employed and still collecting, you may have a large tax bill awaiting you if you haven’t been paying taxes on your benefits. Getting a job may reduce your tax debt, and many job-hunting expenses are eligible to be deducted. • Go to school. Various credits and deductions available to students pursuing their education. • Give to charitable organizations. Donations made to charities as well as any items paid for out of pocket to go toward charitable actions can usually be deducted from your tax liability. The more you give, the more you may receive. • File electronically. If you have not yet made the switch to e-filing, next year may be the time to do so. Filing your taxes manually can be tedious and you may be more likely to make mistakes when filing manually. E-filing relies on computer software to guide you through the filing process. Also, electronically filed taxes may result in faster processing and turnaround on your refund. • Use an accountant. Some people think doing their own taxes saves money. However, an accountant is up-to-date on the latest tax rules and regulations and can help clients reduce their tax liability. Accountants may know about lesser-known deductions and many times the cost of the accountant’s services is offset by the higher refund the accountant gets you. Editorial provided from http://www.metrocreativegraphics.com
A new year not only brings a host of new opportunities, but it also brings a host of familiar obligations. One such obligation is paying taxes, which doesn’t have to be done until mid-April. But waiting until the last minute with respect to taxes can make the process even more difficult, and putting it off certainly won’t help those people who vowed to stop procrastinating in the new year. Getting a headstart on tax season can be beneficial in numerous ways, not the least of which is avoiding the last-minute rush to file your return come the filing deadline. Even if you have yet to receive your W-2 (which you should have in hand by January 31), there are steps you can take to get ready for the coming tax season. • Gather your documents. Your W-2 is likely not the only document you will need to prepare your tax return. Statements regarding your investments, student loan payments, mortgage and a host of other documents might be necessary for you to fill out your return. You should start receiving these documents in January, so gather them as they come in and keep them in a convenient place. This will ensure you don’t get frustrated when filling out your return while increasing the chances you earn all of the credits and deductions you deserve. • Examine past returns. Many people have questions when filling out their tax returns, but those who wait until the waning days of tax season to prepare their returns ignore those questions in an effort to make the filing deadline. When you start preparing for tax season early, examine past returns and see if there are any questions you wanted to ask in the past that you didn’t have time for. Write these questions down as you comb through your past returns and bring the questions to your tax preparer when the time comes. If you don’t plan on hiring a professional to prepare your tax see TAX, Page 4
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Are Social Security benefits taxable? By DENISE JONES
Social Security District Manager in Council Bluffs, Iowa
Wise taxpayers may want to take advantage of winter months indoors to prepare for tax filing season this spring. Whether you are a small business owner, a retiree, or a new parent, here are some Social Security tax tips that may help you. Are Social Security benefits taxable? Yes, for some people with higher incomes. About one third of those receiving Social Security benefits must pay taxes on some of their Social Security benefits, depending on the amount of their taxable income. Learn more at www.socialsecurity.gov/planners/taxes.htm. Will I get a tax form for my Social Security benefits? Yes. Beneficiaries should receive their Social Security Benefit Statements (Form SSA-1099) for tax year 2013 on or before January 31, 2014. If you receive Social Security and don’t receive your 1099 by the end of January, you can request one online at www. socialsecurity.gov/1099. We had a baby in 2013. Does our child need a Social Security number? Yes. Most people apply for their baby’s Social Security number while they’re still in the hospital at the same time they register for the birth certificate. But if you didn’t, you’ll need to apply for your child’s Social Security number before you file your tax return in order to claim the child as a dependent. You’ll also need it if you ever apply for government benefits on behalf of your child or your family. Learn more about Social Security cards and numbers at www.socialsecurity.gov/ ssnumber. I changed my name when I got married last year. Do I need to report it to Social Security? Yes. If you’ve legally changed your name due to marriage, divorce, court order, or for any other reason, make sure you change your name with Social Security, as
well as with your employer. If you change with one source but not the other, it could cause your earnings to be improperly recorded and you may not get all the benefits you are entitled to when you become eligible for Social Security in the future. Failing to change your name on your Social Security record could also cause a delay in your receipt of any federal income tax refund. You can learn more about your Social Security number and how to change your name at www.socialsecurity. gov/ssnumber. I own a small business. Can I report my employees’ W-2s to Social Security electronically? Yes, and we encourage you to do just
that at www.socialsecurity.gov/ bso. Filing your W-2s electronically is free, fast, and secure! Plus there’s an added bonus: when you file electronically, you receive an extra month to file because electronically filed W-2s aren’t due until March 31. You’ll also receive an electronic receipt. And when you enter your W-2 information online, you can simultaneously print out the W-2s for your employees. Learn more at www. socialsecurity.gov/employer. Does Social Security have any tips at this time of year for those filing their taxes? Yes. We encourage you to carefully check: your name, Social Security number, and all data on your W-2s; your
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online Social Security Statement; and your Social Security card to make sure they all match. If you don’t have access to your card or Statement but know your Social Security number, make sure the number and information is correct on your W-2s. A mismatch could delay your tax refund and cause problems with your Social Security benefits in the future. Such errors are much easier to fix early on. If you do notice an error, contact Social Security at 1-800-7721213 (TTY 1-800-325-0778), or if the information on the W-2 is incorrect, notify your employer. For more information about Social Security, visit www.socialsecurity.gov.
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es, you can contact the IRS with your questions, and the earlier you do so, the more quickly you are likely to have your questions answered. * Take your time. When you decide to get an early start on your taxes, you allow yourself to take your time preparing your return. This reduces the likelihood of getting stressed when filing your return. Many people get a bit nervous when filing a tax return, but that stress can be even greater if you leave everything until the last minute. If you’re starting early, take your time when working on your return and don’t succumb to any potential stressors. * Consider hiring a professional. Starting early also gives you an opportunity to determine if preparing your own return is too tall a task. If that’s the case, consider hiring a professional to prepare your return. If you decide to hire a professional, do so early so that person has more time to devote to your return. If you wait too long, chances are the tax preparer will be buried with many other customers’ returns and won’t be able to devote as much time to preparing your return as you would like. More information about getting ready for tax season is available at www.irs.gov Editorial provided from http:// www.metrocreativegraphics.com
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When it comes to taxes, unless you are an accountant, things can get real confusing, real fast. Regardless, CPA David Lashier, of Miller, Shearer and Lashier, in Shenandoah said there’s no reason why someone can’t file their own taxes. However, he added there are a few common tax deductions one should take advantage of in the adjusted gross income section, as well as some that are available if you choose to itemize your deductions. • A student loan interest deduction will allow you to deduct the interest you pay, if you are a current or former student paying on a qualified student loan. But Lashier said if you are married, and you file separately, you can’t take advantage of this deduction. • Moving expense tax deduction allows you to deduct your moving expenses from your income. In order to qualify for this deduction, one’s new job must be a minimum of 50 miles farther away than the old job location, and it must be a full-time job – at least 39 hours during the first 12 months
right after you start the new job. • A tuition and fees deduction will allow a taxpayer to deduct the cost of college tuition, and other mandatory school fees, if currently a college student. Lashier said this is a deduction you don’t have to itemize to utilize. Instead, one can use it as a way to adjust your income or take a college fees credit. Additionally, in Iowa, Lashier said there is a Iowa Tuition and Textbook Credit that will allow you to deduct workbook fees or other specific supplies Taxpayers who have one or more dependents attending Kindergarten through 12th grade in an accredited Iowa school are eligible. The credit amount is 25 percent of the first $1,000 paid for each dependent for tuition and textbooks. To read what is eligible to deduct and what isn’t, go to http://www.iowa.gov/tax/1040EI/ Line/10Line48.html. For example, Lashier said football, soccer, and golf shoes, as well as track spikes are eligible, but basketball shoes are not – because they are also suitable for everyday wear. • Health Savings Account could be a deduction, but only if you are cov-
ered by a high-deductible health insurance plan and can’t be covered by any other health insurance plant. • Did you know you can deduct mileage for medical purposes? Lashier said 23 cents per mile can be deducted from your taxes if you are driving to and from a medical treatment facility for a medical condition. • Like to help out your church or a charitable organization? Lashier said you can also deduct mileage, if using your personal vehicle for charitable work – 14 cents per mile to be exact. On top of that, if you incur out of pocket expenses in helping a charity, that cost can be deducted as well. Lastly, Lashier said giving away items you no longer want, lets say to West Central Development, or Goodwill, you can deduct what you gave away, if given a receipt from the organization that is detailed with what was given away, and the dollar amount. “It’s too bad it has to be complicated,” said Lashier, but fortunately, it’s a little bit easier to find some extra money on your returns with the deductions above.”
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How to prepare for tax time Although some are ready to say their fond farewells to 2013, thought needs to be given to the 12 months that just passed as tax-filing season approaches. Tax season is a few months away, but itâ€™s never too soon to begin preparations for filing income taxes. Some people prefer to toast the new year and then arrange appointments with their accountants, while others use the new year as an opportunity to get organized and start compiling paperwork and tax questions. Preparing for tax time at the dawn of a new year can make the process go more smoothly in the months ahead. Here are some tips on how to prepare for the upcoming tax season. â€˘ Start a documents folder. Employers, charitable organizations, banks and other financial institutions begin mailing out tax forms from the previous year in early January. Individuals should keep their eyes open for any mail that appears to be tax-related. Store these documents in a folder that can protect any sensitive information. Such folders also make information more accessible as more and more documents arrive in the mail. â€˘ Begin collecting receipts and itemizing expenses. Many expenses are tax-deductible. These can include education costs, moving expenses, home improvements, medical expenses, charitable donations and childcare costs. Store receipts and other documentation, including canceled checks, with the other tax documents. These will come in handy should an audit ever be ordered. â€˘ Create a spreadsheet of important information. It is handy to have all financial information at the ready. Some accountants
will lower their fees if people do some of the filing preparation work themselves. This can include creating a profit/loss statement on investments, or working up a tally of charitable donations. Make an itemized list of all pertinent information so it will be handy when tax-filing time arrives. â€˘ Decide on a filing option. Technology has made filing taxes much easier. Tax preparation software is available for those who choose to file their taxes themselves. There also are walk-in centers that will prepare tax-filing documents. Individuals also can visit a certified public accountant. Whatever method taxpayers choose, allow for ample time to gather information and get the taxes filed by the deadline. Leave some wiggle room in case one filing method doesnâ€™t work out. â€˘ Start saving money. Although the goal is to get a refund each and every year, taxpayers sometimes owe money, which can be troublesome for men and women whose budgets are stretched thin already. Those who owed money in the past should begin saving money for tax expenses as early as possible. â€˘ Develop a good filing system. Many financial professionals will advise people to keep financial records for 7 years. Any tax documents should be kept together should they need to be referenced or if an audit is ordered. Designate a filing cabinet or a box specifically for tax documents. Tax filing season is right around the corner, and the dawn of a new year is a great time for men and women to start gathering documents and preparing their returns. Editorial provided from http://www.metrocreativegraphics.com
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