WORKBOOK: Get Yours
For us to do your taxes, the workbook needs to be fully filled out and submitted to us.
It is a free download, no sign up/password required. TO USE IT AS A PDF FILL, YOU MUST DOWNLOAD AND SAVE IT TO YOUR COMPUTER FIRST, THEN REOPEN THE SAVED FILE. You will then be able to type and save it as often as you need to using Adobe Reader. (download here) If you are using a Mac computer, make sure you are not filling it out in Apple Preview mode or it will print out blank! Or you can just print it out and hand write the answers. If a section does not apply to you, put N/A and skip that section. We need to make sure we are covering all aspects of your US filing requirements.
Should you have your business records in another format (excel or Quickbooks), you can just email those to us and note that in the workbook.
Comprehensive Guide to Contracting: Learn more
Just a regular guy or gal? Starting a business? You still want to get it done right and minimize your tax burden. Our workbook contains a page for small business. We are Quick Books Pro Advisors and can assist you with your accounting as your business grows.
This is the number at the bottom of the first page of the 1040 tax return. It is supposedly the total income for the year just before all the deductions kick in. In theory, it is what someone lives on for the year. Financial institutions are most interested in this number when they are evaluating the financial status of an individual. This can hurt a traveler whose earned income (what shows up on their W2), is artificially low, because reimbursements have replaced their income.
The AGI is also utilized in several computations on the personal tax return, including the reduction of allowable medical and business expenses.
Many taxpayers have grown up with a type of “old wives’ tale” of entering $500 on the charity deduction line, because it did not need to be substantiated. (wink, wink) Those days are over! Today, receipts are required for every donation, AND depending on what is donated and how much is claimed, the receipt requirements get stricter and stricter.
If you have the remotest possibility of itemizing, get a receipt for everything. It must have the date, organization name, and donated amount/value. For non-cash charitable donations (clothing/household items) the receipt should also have some sort of listing of items. Because many of these donation facilities have only tiny receipt slips, it is acceptable to attach your own itemized list of items to the receipt.
The valuation of your non-cash charitable donations can be found in multiple areas of the internet. Below we have links to the two main donation center valuation guides. Hopefully, you can utilize these lists to create your own records.
There are many individuals that have put off filing returns for years. Eventually, it catches up to you especially if the taxing agencies calculate a tax delinquency based on their own data, or you hold a professional practice license that requires the filing of a return. We can help/work with you on this. Stop avoiding the issue & let us help you get it cleaned up. Just give us a call.
The IRS will typically send a letter asking for a filing and if no response is made, will file a return for the taxpayer based on a married filing separate or single filing status. No refunds are issued – that requires a filed return, but any delinquencies that the IRS calculates will be pursued. This is where most back filers find themselves when they come to us.
The attack plan is to file a return. That sounds simple but it can become complex when there are no records or W2’s. The IRS can provide the information that they have, but many states do not keep a record of income and withholding that would be found on your W2. Many individuals who have not filed and have large amounts due ask whether that can make an offer to settle their taxes at an amount less than the amount of the delinquency. The IRS has strict guidelines for this, but you must have all the returns filed before this can be pursued.
There are tax breaks for filing jointly, so it usually is best to go that route. File separately only if you are unable to get your spouse’s information and signature. The thing to realize is that even with a joint return, the IRS has forms for allocating income tax, liability, and a proportional refund. They can issue refund checks in your name only, and even mail them to a different address if needed. Don’t sacrifice your money because of fears. Talk this over with us when we do your tax consult appointment to understand your options.
What you wind up doing here is balancing financial benefits and the status of your relationship. If you can, you want to avoid filing separately. It rarely benefits either person, due to preset limitations.
If both of you can cooperate enough to file as married, and split the refund appropriately, this is best.
If you are legally separated on the last day of the year, or have not lived together between July 1st-Dec 31st, you may file as head of household (if you qualify with a dependent).
FILING STATUS – What are the regulations for registered domestic partners/civil unions/same sex marriages?
This is an ongoing area of change in the tax world. For now, the question is limited to the states that allow for same sex marriages or civil unions. Only a handful of states have a provision for joint filing and unlike common law marriages, this status is not portable, meaning that another state will recognize a union consummated in another state. Call us to discuss your particular situation.
If you are married on the last day of the year, you are considered married for the whole year, regardless of whether your spouse works outside of the home or not. There is a financial benefit of joint status that should never be ignored. However, if you are having marital problems, see the other tabs.
Head of Household means that you are unmarried (or considered unmarried) on the last day of the year and can claim a dependent. (A qualifying person who has lived with you for over 6 months of the year, and you are responsible for maintaining over half the cost of the home). Exceptions exist if that dependent is away from home for temporary absences like school, or if it is a parent (who may be living in an assisted living facility).
Let’s clarify what a deduction is first. A deduction represents money spent on something that the government decided you do not have to be taxed on. It is money that you have already spent.
Itemizing is a hassle. Receipts have to be kept and categorized throughout the year. Then they have to be listed on your return, math has to be done with percentages and your adjusted gross income (AGI). Then all of those records need to be saved in case of an audit.
When tax returns were first implemented, it created a lot of paperwork for a lot of people. As a result, the IRS decided to create a Standard Deduction. It represents the average amount that the average person would deduct if he/she were to itemize. No records required. Just subtract that one number from your AGI and you are done. No receipts or records needed. But what about the non-average person who happens to have more than the standard? They are allowed to itemize every qualifying deduction.
What about the person that has less than average? They luck out with more than their share of deductions when they did not even spend the money. Ergo: 50% of the people that “just take the standard deduction” are actually making out better than they deserve!
The 2020 standard deduction for a single individual is $12,00 and $24,400 for married filing jointly. If you have more than this in deductions you need to be more diligent in saving receipt and records. To be honest, the best thing to do is to print out or fill out our workbook. If we ask for a number, you need to keep a record or receipt for it. If it is not in there, throw it away. We constantly update our workbooks to be accurate.
HSA are used in conjunction with high deductible health insurance plans. They give the taxpayer the opportunity to put away pre-tax money into an account AND earn interest/capital gains that grow tax-free. Amounts can be withdrawn without penalty or taxes if used for medical purposes. It works on a lifetime accumulation and stays with you until it is used up, regardless of whether you decide at a later date to switch over to a regular insurance plan.
The catch is that the annual deductible for your insurance is high, so it is a much better deal for the healthy who are less likely to have regular expenses.
Many use it as a way of adding to their retirement funds if they have already maxed out their retirement contributions for the year. After all, as you age, you are almost guaranteed to have regular medical expenses and you will be able to use your HSA, and save your IRA and retirement money for other fun things… like your winter condo in Arizona!
Most taxpayers are aware that they can deduct medical and dental expenses, but they do not understand the 7.5% AGI floor. The AGI(adjusted gross income) for the year (bottom line on the first page of the 1040) gets multiplied by 7.5% and that sum is subtracted from your total deductible medical expenditures for the year. (A $50,000 AGI reduces your medical deductions by $3750.) For most individuals, it reduces their deduction to zero.
This is why we encourage participation in a FSA or HSA, because it is the only way to avoid the 7.5% reduction.
Only the after-tax expenses are eligible to be claimed as a deduction.
– Most employer-provided health insurance is paid for with pre-tax money (taken out of your paycheck) and does not qualify.
– Any medical expenses paid out of a Flexible Spending Account or a HSA are pre-tax and do not qualify.
What needs to be kept and for how long? Because the IRS has up to 3 years to audit a return, and often they notify taxpayers about 2 years into that time period. How well can you remember what you did 3 years ago? Some travelers have to recreate their assignments with correct dates and expenses or pay thousands to the IRS because the records have been lost.
Anything used to obtain the numbers on the tax return needs to be kept 6 years and you should probably extend that to 7 years to cover the end of the year. (If the IRS suspects major issues with unreported income, and travelers have a lot of income tied up in reimbursements, they can then open the audit up to 6 years.)
What is the point of defining a refund? By explaining first what it is not. It is NOT free cash that a conniving tax preparer embezzles from the government. (haha!)
So what is it? It is a result of too much money being withheld from a paycheck. That’s all. That is why the IRS calls it an OVERPAYMENT. Look at the bottom lines of a tax return and you will see that the IRS is refunding the overpayment. At the end of the year “the books are settled” when the tax return is filed. Too much withheld = refund; not enough put in = owe.
Does the person that gets a $4,000 refund realize they overpaid the government by $330 every month? And then they say they need their tax refund to pay off bills!
ROTH’s are unique in that contributions are after tax – there is no tax deduction for contributing to a ROTH. (However, there are income limits.) The beauty of this situation is that while you pay taxes on what you put in, you don’t pay taxes on the capital gains/interest when you take it out, provided you take it out under the withdraw guidelines. The other IRA’s are salary deferral arrangements. Contributions to these programs are tax-deductible, but upon retirement, the earnings are taxable.
High-income taxpayers generally benefit more in the long run with traditional IRAs. Young or low-income individuals usually benefit with the ROTH, because that money has a long time to grow.
Talk to your investment advisor about what is right for you.
This requires a lengthy list of “what ifs” that space here does not provide, and combinations of plans can be pursued that will increase the amount that can be contributed. Also, the plans that one would pursue as an employee can produce a result very different from that of a self-employed individual. A self-employed individual can contribute roughly 20% of their net profit based on a rather confusing formula. Profit sharing plans can be added to increase this amount.
We work closely with an investment/financial advisor to achieve the maximum benefit for our clients.
IRS Tax Topic 306 from the IRS.gov website is very clear on this, so we will just quote: “The United States income tax is a pay-as-you-go tax, which means that tax must be paid as you earn or receive your income during the year. You can either do this through withholding or by making estimated tax payments. If you do not pay enough tax, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will have paid enough tax to avoid this penalty if they owe less than $1,000 in tax after subtracting their withholding and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.”
The point to take away from this is: Do not adjust a W4 so there is waaaay too little money taken out of a paycheck, or there may be penalties to pay!
Many fill these out with fear and trembling, probably due to the phrase just above the signature, stating that the signer of the document is under penalties of perjury, but in reality, that is only so there is a legal recourse for income tax evasion when someone declares themselves exempt. The true purpose of this form is so the employer withholds the correct amount from each paycheck.
As long as the correct amounts are withheld, the IRS could care less if you have withholding at the higher single rate. But they do want their money, and if these forms are filled out incorrectly, resulting in less than: a) 100% of the previous year’s tax liability or b) 90% of the current year’s liability, there are penalties and interest at filing time.
If you have more than one job and file the W4s out correctly for your status, there will be an overcalculation of your deductions and the withholding on your paychecks will be too low, causing a painful amount due come tax time. This is because each payroll department knows nothing about the other job. They each calculate your standard deduction before they take out the taxes.
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We are unable to answer questions related to the use of tax software programs.
If you are a current client with questions about contracts, withholding forms, or information regarding a new state you are heading to, feel free to call us! we are here to help. - If you are calling to talk about establishing or maintaining a tax home, you may schedule a tax home consult here.Remember that tax home issues can create a major tax liability if not handled correctly.
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Mail: 46 St. Mark Rd., Taylors, SC 29687
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