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Are you planning to tie the knot this summer? If you already did, then my warmest congratulations to both of you! To make sure that there are no surprises come tax time, I will share with you three summer tax tips that you can do right now.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
So here are the three summer tax tips:
- Report any name change to the Social Security Administration before filing your next year’s tax return. It would cause delayed refund if you changed your name without informing the Social Security office.
- Report any address change to the United States Postal Service, your employers and the IRS to ensure your receive tax-related items.
- Finally, use the withholding calculator by going to https://www.irs.gov/individuals/irs-withholding-calculator to make sure you adjust your withholding appropriately. This is important for families with more than one wage earner, for taxpayers who have more than one job at a time, or for those with children.
So those are the three summer tax tips that you can do right now if you just got married to avoid any tax issues during tax time. Congratulations!
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Tax on 2018-07-31 06:48:58 PM
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Did your kid get a part-time job during the summer? And now you were you wondering if your kid needs to file taxes for next year.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
If your kid has only a W-2, your kid needs to file a return if the total is more than the standard deduction. Starting in 2018, the standard deduction for a dependent child is up to $12,000. That means your kid can make up to $12,000 without paying taxes. That’s almost double from the 2017 numbers.
Here are two other things that you need to consider:
- Have your kid claim “exempt” on the W-4 withholding allowance form so that he does not have to file a tax return if he makes less than $12,000.
- Your kid should still file a return if he or she qualifies for the other credits like earned income credit, additional child tax credit, or refundable American opportunity education credit.
There you have it. That’s the new tax filing requirement for 2018.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2018-07-31 06:48:22 PM
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Did you own a home with your spouse when she was still living? And were you planning to sell your home but you were wondering if you can claim the capital gain exemption?
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
In order to claim the $500,000 capital gain exemption on the sale of your home, the sale needs to happen within two years from your spouse’s date of death. You also need to meet the three requirements below:
- Either you or your deceased spouse must have owned the property for at least two years before your spouse‘s death.
- The couple must have lived in the home for at least two years prior to the death of the spouse.
- The capital gain exemption must not have been claimed by either spouse in the two years before death.
Example: Joe and Jackie are married and have owned and used their home since January 1, 2000. On January 1, 2018, Jackie passed away. If Joe sells the home before January 1, 2020, he will qualify for the $500,000 capital gain exemption.
Here’s one tax trap that you need to be aware of – this rule will not apply if you decide to remarry before the sale of your home within the two-year period. So watch out!
That’s all I have for today. So make sure that you meet all the tax requirements so you can claim the exemption when you sell your home after your spouse’s death.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Tax on 2018-07-31 06:47:51 PM
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Do you have children or dependents? Do you make above average income and cannot take the tax credit from prior years? If you answered “yes” to both questions, then I got great news for you. With the recently passed new tax law, you might be able to take advantage of the new and improved 2018 child tax credit.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Here are three things you need to know about the new 2018 child tax credit:
Tax credit is doubled
- Credit went up from $1,000 to $2,000 per kid.
- Your kid must be under 17 at the end of the year to claim the credit.
Income range huge increase
- This credit will now be available to more taxpayers, because of the massive increase in the income range. Here's a quick guide:
Married filing jointly - $400K - $440K
Other filers - $200K - $240K
- So if your income is below the limit, you can take the full credit. But if it falls between the income range, then you can only make claim a partial credit. But if your income exceeded the limit, you cannot take the credit.
Other dependents’ credit
- They also passed a nonrefundable $500 "family credit" for other dependents. Examples are your aging parent or your kid who is 17 years or older.
One thing I want to point out is that - this is a credit, not a tax deduction. While a deduction reduces your income, a credit reduces your tax dollar-for-dollar. So, for example, if you have a tax due of $2,000 for the year, and have a $2,000 child tax credit, your tax bill drops to zero.
To recap, here are the three things you need to know about the 2018 child tax credit: 1. The tax credit doubled, 2. Income range huge increase & 3. Other dependents’ $500 credit.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2018-06-07 06:53:35 PM
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Are you thinking of getting a divorce? Before you jump and do anything, I would recommend that you read this blog to know the eight important things about the 2018 alimony tax changes.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Here are eight things you need to know about the 2018 alimony tax changes:
- Effective date - any divorce agreement executed after 12/31/18.
- New 2018 tax law - alimony payments are no longer deductible and alimony income is no longer included as income.
- Grandfathered payments - any alimony paid based on a divorce agreement in place on or before 12/31/18 remains deductible by the payor spouse and included as income for the recipient spouse
- Modified agreements - the old tax rule still applies unless the agreement expressly states that the new 2018 tax law applies. That means, that the modified agreement will lose its grandfathered payments and status.
- Timing - if you are thinking of filing for a divorce in 2018, it is very important to time the divorce/alimony settlement before 12/31/18.
- State conformity - determine if your resident state agrees with the federal law. For example, in California, they still allow the alimony deduction and inclusion in income.
- Tax strategy - make sure that you account for the federal and state tax effect of the alimony payments or receipts when you are working with your attorney.
- Reason for change - Congress called the alimony deduction a “divorce subsidy”. They argued that divorced couples can benefit more compared to a married couple. So they want to treat alimony as a non-deductible child support. The Joint Committee on Taxation estimates that this tax change will add almost $7 billion in tax revenues over ten years. Wow!
To recap, make sure you remember these eight important things in case you are getting a divorce.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2018-05-31 10:26:20 PM
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Are you planning to buy a new home? Are you thinking of refinancing your mortgage? Or taking out a home equity line of credit? If you answered “yes” to all the questions, then it’s important for you to know the new tax law regarding mortgage interest deduction.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Here are seven things you need to know about the new mortgage interest deduction:
- Effective date - any loan started after 12/15/17.
- New 2018 tax law - you can deduct interest for up to $750,000 in new mortgage debt for your first and second home. Under prior law, you can deduct mortgage interest on $1 million of home debt and $100,000 of home equity debt.
- Couples filing separately - each spouse can claim $375,000 in mortgage interest deductions.
- Grandfathered debt - any mortgage loan you entered before 12/15/17 will allow you to claim interest up to the $1 million ($500K for married couples filing separately) for your first and second home.
- Mortgage refinancing - you can deduct your mortgage interest if you refinance your mortgage debt up to $1 million on or before 12/15/17. But the new loan can’t exceed the amount of the current mortgage being refinanced. Example - If you have a $1 million mortgage and you paid it down to $700,000, then you can refinance it up to $700,000 of debt and continue to deduct interest on it. If you refinance it for $900,000 and you use $200,000 of cash to upgrade your home, then you could also deduct the interest on $900,000. But if you refinance for $900,000 and simply pockets $200,000 of cash, then you could deduct interest only on the $700,000 of refinancing.
- Home equity line of credit (HELOC) debt - interest on a HELOC is only deductible if the loan proceeds are used to make substantial improvements to your home, and the combined total of the first mortgage and home-equity line of credit or second mortgage does not exceed $750,000.
- State conformity - determine if your resident state agrees with the federal law. For example, in California, you can still deduct mortgage interest on $1 million of home debt and $100,000 of home equity line of credit (HELOC) debt.
There you have it. Those are the seven things you need to know about the new mortgage interest deduction.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2018-05-31 10:25:59 PM
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Raise your hand if you heard about the new tax law? Now, raise your hand if you understood some of them. For the rest of you, raise your hand, if you have no clue what I’m talking about.
President Trump signed the new tax reform bill into law last year. This is the most significant tax change in more than 30 years. So the million dollar question is: How will this affect you? So today, I’m going to share with you 10 tax changes that you need to know now so you can plan and prepare for 2018. Are you ready?
#1. Lower tax rates
Across the board, all the tax brackets went down by 3% give or take. What does that mean to you? If everything is equal, meaning, your tax situation is the same, then you will get slight tax refund on your return next year.
#2. Standard deduction doubled & elimination of exemptions.
For single filers, the standard deduction increased to $12,000; for married couples filing jointly, it is increased to $24,000. What does that mean to you? It could be a good thing or a bad thing? It’s a good thing if you were filing standard deduction from previous years because you will benefit by the increased deductions.
However, it’s a bad thing if your Form Schedule A itemized deductions is lower than the new standard deduction. Basically you are losing out on some of your deductions which we are going to talk about later.
#3. Medical expenses are still deductible.
They almost took this out. Let’s talk about this. You can only deduct medical expense in excess of 7.5% of your income. So for example, you make a $100,000, 7.5% of $100K is $7,500. That means, if your medical expenses were $8,000, then you can only claim $500 of medical expenses.
My client, who had a kidney operation learned about the limitation, so he asked me: Noel, how can I deduct my kidney operation? I told him: have another surgery? So that’s what you have to do. You need to see if you can bunch major medical expenses into one year to get the medical deductions.
#4. State and property tax $10K limit.
Here’s the good news: you can still deduct your state tax withholding, sales tax and property tax on your return. Here’s the bad news: you will be limited to $10,000 of deductions.
What is your strategy? Well, the state is coming up with a bill. They will create a fund that you can donate money for the benefit of various California agencies. You will get a potential tax credit for CA and an IRS tax deduction.
Example: If you give $100K to this fund, you will get back $100K CA tax credit and also 37K of IRS tax savings (assuming you are in the 37% IRS tax bracket). In essence, you got back $137K by contributing $100K to this fund. It’s in the works. Beware though! IRS might not approve and will contest this.
#5. Mortgage loan $750K limit.
Mortgage interest will be limited to mortgage debt of up to $750,000 ($375,000 for married filing separate). Home equity line of credit cannot be deducted anymore (you need to review your equity line interest rate and compare with your investments to determine if you need to pay it off. Also, try to pay down your mortgage debt if it’s more than $750k and you can also downsize to meet the $750K mortgage debt limit).
#6 Elimination of miscellaneous & moving expense
No deduction is allowed for miscellaneous itemized deductions (these include unreimbursed employee expenses, management fees, tax preparation fees, investment expenses, etc.)(You need to discuss this with your employer and see if you can ask for an expense reimbursement or a salary increase to cover the expenses.
#7 Elimination of alimony deduction
Raise your hand if you know someone that got divorced last year? Now raise your hand, if you know someone will get divorce this year? You know the big difference? Your ex will get more than half.
Alimony payments will no longer be deductible for the spouse who writes the checks. Likewise, it’s not taxable to the one receiving the payments. That means you have to take this into account - non-deductible alimony payments - in case you get divorce and trying to finalize a settlement in the future). Keep in mind though that this tax change will be effective for tax year 2019.
#8 Bunch charitable donations in one year
Since the standard deduction went up, you might not be able to go over the standard deduction. You might feel that you are losing out on the charitable deductions. What do you do? You would give the same amount over a two-year period, but you would bunch them into one year. This will help you itemize your deductions so you don’t lose your tax benefits.
#9 Lower corporate tax rate.
Raise your hand if you have a C-corporation. The corporate tax (C-corporations) will go down from 35% to 21%. They now have a flat tax rate of 21%. What is the only issue? If your net income is usually less $50K, under the old law, you will only pay 15%, under the new law, you will pay 21%. That means you are paying more taxes. What is the solution? You need to look at the other business structure and see if you will come out ahead.
#10 Lower pass-through entities business tax rate
Pass-through entities like S-corporations, LLC, and partnerships – who report their business income on the owner’s personal tax returns, and a sole proprietor, will have a 20% deduction. The 20% deduction would not be allowed if you are in a service business unless your taxable income is less than $315K for married and $157.5K if you are single.
Last Updated by Admin on 2018-02-05 09:07:36 PM
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If you are going to use your car for business, charity, and medical appointments during 2018, please be aware that the standard mileage rates for computing the deductible costs have changed.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Effective January 1, 2018, here are the rates to use to calculate reimbursements and deductions for the year:
- Business. The rate is 54.5¢ per mile for business miles driven (up from 53.5 cents in 2017)
- Charitable. For charitable services, it remains at 14¢
- Medical. The rate for medical mileage is 18¢ per mile (up from 17 cents in 2017)
Keep in mind that the mileage expenses for moving expenses and job-related mileage deductions for employees were eliminated effective January 1, 2018. For tax planning purposes, talk to your employer and see if you can get a reimbursement for both of these expenses. If not possible, ask for a raise to at least cover all or at least part of your expenses.
That is all for now.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2018-01-24 07:01:02 PM
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Are you following the most recent tax proposal development? If not, no worries - I will give you the most up-to-date development.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Both the House bill and the Senate measure calls for the elimination of most itemized deductions (that is Form 1040 Schedule A Itemized deductions). And in case they finalized the tax proposal this month, it won’t take effect until the 2018 tax year. However, we still need to plan since it could affect some of your 2017 year-end tax moves.
Here are six itemized deduction-related moves that you need to do now:
- Pay your state taxes. If you live in a state that tax salary & wage income, you need to pay your state taxes as much as you can this year while they're still deductible. A great way to do this is to make your final state estimated tax payments before the year-end.
- Pay your real estate taxes early. The House bill is allowing up to $10,000 of real estate tax deduction. If your property tax bill is higher than that, then pay it in December instead of early next year, to avoid losing some deductions.
- Prepay your January mortgage. The increased standard deduction amounts could make your mortgage interest deductions irrelevant. So by prepaying your January mortgage in December, it will increase your deductible mortgage interest for 2017.
- Bunch medical expenses. If you had a challenging year as far as your or family members' health, this is the year to make sure you don't waste any expenses. So, in addition to year-end doctor and dental visits, make sure you don't overlook other possible medical deductions. And if you are scheduled for a major surgery next year, I would recommend doing it before year-end.
- Bunch miscellaneous expenses. If you are an employee, make sure you deduct all unreimbursed expenses that you incur while performing your job. Also, don’t forget to deduct such things as job search costs, investment related costs, safety deposit box, accountant fees or tax preparation software costs.
- Donate to your favorite charities. If your other itemized deductions are gone and the standard deduction amount is increased, you might not have enough in donations to file a Schedule A form. So consider increasing or doubling up your donations this year when you can still claim the deductions.
So those are the six itemized deduction-related moves that you need to do now in order to maximize your deductions this year before the tax law changes.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Tax on 2017-12-06 12:55:13 AM
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Have you ever visited the IRS website? I have to tell you, I was pretty impressed with the online tax features. And as the tax filing season approaches, the IRS encourage you to visit IRS.gov first for tax tools and online resources to address any of your issues before calling.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Here are the top seven online reasons to visit the IRS website
- Check your refund status. You can go to irs.gov/refunds so you can check your refund status 24/7.
- Get your transcript. You can access various transcript types online. You may also ask the IRS to mail a tax return transcript to you by requesting it online or by calling 800-908-9946. Please allow 5 to 10 days for delivery. Go to https://www.irs.gov/individuals/get-transcript
- Make a direct payment. You can make tax payments directly from your checking or savings account. You can also view your account balance if taxes are owed. Go to https://www.irs.gov/payments
- Online Payment Agreements. You can pay your taxes by easily setting up a monthly payment plan. Go to https://www.irs.gov/payments/online-payment-agreement-application
- Answers to Tax Law Questions. The Interactive Tax Assistant takes you through a series of questions and provides the answers. Go to https://www.irs.gov/help/ita
- Forms, Instructions and Publications. You can download and view popular tax forms, publications and instructions anytime. Increasingly popular eBooks are available as well. Go to https://www.irs.gov/forms-instructions
- Where’s My Amended Return. Taxpayers can track the status of an amended return. Go to https://www.irs.gov/filing/wheres-my-amended-return
So I encourage you to try it and check out my top seven reasons why you need to visit the IRS website this upcoming tax season.
Last Updated by Admin on 2017-11-29 08:14:57 PM
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Noel: What do the Irvine Company, McDonalds and our lovely President have in common?
Audience: They don’t pay taxes.
Noel: (laughing) Great. (Laughing) They’re a billion dollar real estate investors. And you might be wondering, how in the world were they able to do that?
Noel (cont’d): Simple.
Noel (cont’d): They took advantage of the most powerful real estate tax strategies.
Noel (cont’d): They use the powerful tax code to zero their taxes.
Noel (cont’d): As you can see, IRS is their friend. Is IRS your friend?
Audience: No!
Noel: No? Well, then in the next few minutes you’ll discover 5 ultimate tax secrets to zero down your taxes.
Noel (cont’d): It’s called (picks up piece of paper from table) – the LDDER Approach. That if you apply (puts paper down on table) you will zero your taxes.
Noel (cont’d): So you can pay zero and become
Noel (cont’d): the hero.
Noel: Are you guys ready -
Audience: Yes.
Noel: To become the hero?
Audience: Yes.
Female voice: Always.
Noel: Let’s do it. The first L (picks up paper from table) stands for like-kind exchange. Raise your hand if you’re familiar with like-kind exchange.
Noel: Great! (puts paper on table). A like-kind exchange allows you to postpone your taxes by exchanging up to a higher price property. It’s a way to consolidate your real estate portfolio…
Noel (cont’d): Or to – to minimize your taxes by building up your portfolio. It’s a two-step process.
Noel (cont’d): One – you got to sell the property. Number two, you have to re-invest the cash proceeds.
Noel (cont’d): I have a client. His name is Rich. He started with one triplex twenty years ago.
Noel (cont’d): Guess what he ended up with right now?
Noel (cont’d): Apartment buildings.
Noel (cont’d): He started with a triplex. Now it’s worth I think ten million dollars.
Audience: Wow!
Noel: Here’s a strategy that you may not be familiar with. Once he passed away,
Noel (cont’d): and that property transferred to his survivors – which might be the kids – his starting number which he bought way back, I think like half a million dollars. The starting numbers of the beneficiaries – or the kids – is not half a million dollars.
Noel: Its ten million dollars. So, if the kids decided to sell the property the next day for ten million dollars, guess – what’s the tax for the kids?
Audience: Zero?
Noel: Zero (makes symbol of 0 with his hand). What is the strategy called? It’s called the 3D. It’s defer – defer – and die. Remember that.
Noel: (laughing) Very powerful concept! The next one, the D (picks up paper) – stands for depreciation. (puts paper down) Depreciation allows – it’s a deductible expense for the wear and tear of the property. What is the plus? It’s a paper loss. There’s no money coming out of your pocket. I have - I have a client, Rich, I met 15 years ago. He went to my office and he said, “Noel, can you review my taxes?” And I said, “What do you have?” He said, “I only got like 2 rental properties.” And I was thinking, ‘Aah, that’s gonna be easy.’ I sat down and look at the schedule E form line one, gross rents - one million dollars. I said, “Whoa, what do you have?” “Well, I’ve got two apartment buildings.” It just gets better. One million dollars gross rent. Rental expenses, eight hundred thousand dollars.
What’s the rental income?
Noel (cont’d): Two hundred thousand dollars – on his pocket – doesn’t fit over here (demonstrates his pants pockets). But, he’s got two hundred thousand dollars cash in his pocket. Now, here’s the kicker. I told you about depreciation, right? His depreciation was two hundred fifty thousand dollars. What’s his loss showing on the return? Fifty thousand dollar loss! I was looking at him and said, “You’re putting two hundred thousand dollars in your pocket? And you’re showing 50K of losses.” And, I was thinking, ‘Man, this is too good to be true.’ But, it was there.
Noel (cont’d): So, take advantage of that depreciation to maximize if you have rental properties. (End of Part 1)
Last Updated by Admin on 2017-10-04 08:46:41 PM
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Noel: Raise your hand if you know Uncle Sam.
Audience: (Silent)
Female: Personally?
Noel: (Laughs)
Audience: (Laughs)
Noel: Great! Now raise your hand if you know Uncle Sam is not really your uncle?
Audience: (Laughs)
Noel: Great. You see, a real uncle usually gives you money, this particular uncle takes away your money.
Audience: (Laughs)
Noel: So, today I will discuss with you, three tricky tax expenses. It’s called the 3 M’s.
I will show you how Uncle Sam takes away your money and I will also show you how to get it back. Are you guys ready?
Audience: Yep. Yes.
Noel: Let’s do it.
Mortgage Interest
The first M stands for, mortgage interest.
I had a client. His name is Johnny. I gotta tell you he’s very extreme when it comes to minimizing his taxes. I was reviewing his return and guess what I saw on the mortgage interest? $50,000 of mortgage interest.
I ask him, “Why is this too high?” He said, “Well, I put zero down so I can get a huge mortgage interest deduction. Noel, it’s called, tax strategy.” I said, “Johnny, let me tell you something.”
This is what I told him.
See, this fifty thousand? That’s your mortgage interest. If I multiply that by 30 percent, which is your tax rate, your tax savings is $15,000. That’s the good part.
Here’s the bad part. The difference between the 50,000 that came out less the tax savings of 15,000 is how much? 35,000.
I ask him, “Do you know where that goes?” He said, “No.” It goes down the drain. That’s where it goes.
Audience: (Laughing.)
Noel: And, I told him that imagine you had it for ten years. So, you multiply $35,000 times 10, that’s $350,000 that you paid for nothing. It’s non-deductible expenses. So he said, “Really? Oh, I’m looking at it differently.” I said, “Yeah.” So, he said, “What can I do? That’s a lot of money.”
I said three things. Number one, do a by weekly payment instead of paying once-a-month – do every two weeks. He said, “Why?” Cause you want to shave off 4-6 years off the mortgage payoff.
Number two is, why don’t you try to convert it to 15-year fixed. Why? You will save a tons of mortgage interest. You’ll probably shave – it’s gonna be close – 15 years – half.
And, then number three, If you have the chance, convert a fixed loan to a line of credit. Why? If you convert a fixed loan to a line of credit – a line of credit is like a credit card expense. If you pay it down, they will base the interest off the balance. The sooner you can pay that off, the sooner you can be debt free.
Medical Expenses
Noel: Number two – the second M– medical expenses.
Alright, medical expenses – have a 10 percent income limitation. That means you can only deduct 10 percent – in excess of 10 percent of your income.
So, let me give you an example. Johnny, for example, makes $100,000 and I multiply by 10 percent. So, his limit is $10,000. If his medical expenses is $11,000, how much can he deduct on his return?
Audience: $1,000?
Noel: One thousand dollars – it’s in excess. So, as you can see the first 10 percent is like a non-deductible expense.
So, guess – guess what happened to Johnny? Johnny had a kidney surgery but he cannot deduct his expenses so he asks, “Noel, what can we do? I want to deduct these medical expenses.” I said, “I don’t know. Have another surgery?”
Audience: (Laughing)
Noel: He looked at me and said, “Okay.”
Audience: (Laughing.)
Noel: Here are three things that you can do to have – have medical expense deduction.
Number one, you have to bunch the expenses together in one tax year. So, if you have a major surgery, plan accordingly and do it in one year.
Number two and number three is about reducing your income. One way to do that is to maximize your 401K or retirement plan and, number two, if you have a sideline business maximize the expense.
Miscellaneous Expenses
Noel: Third M – miscellaneous expenses.
This, miscellaneous expenses, can be broken down into three parts. The first part is what they call, unreimbursed employee expenses. So, if you’re a salesperson, commission people, you can deduct a lot of unreimbursed employee expenses.
The other one is, other expenses, and the other one that I want to talk about later is toastmaster’s expenses, okay? There’s a limit though. There’s a 2 percent income limit. It means that you can only deduct in excess of 2 percent of your income.
So, let me go back again to Johnny. A hundred thousand dollars times 2 percent is two grand. The first two grand you cannot deduct. The only thing you can deduct is above it.
So, if it’s a reimbursed medical expenses – I mean, a reimbursed employee expenses, is $2,001. How much can he deduct? One dollar. I told him the rules.
He got pissed off…
Audience: (Muffled laughter)
Noel: He said, “What can we do?” I said, “Well, the way we can probably do this is, to work on this.
Have you guys seen this before? Who’s doing their taxes? Raise your hand.
There you go. Are you guys familiar with this? This, my friend got 50 deductions.
If you’re not familiar with this, I can e-mail this to you.
Audience: (Inaudible, muffled. Some light laughter.)
Noel: Is that something of interest?
Audience: (Inaudible, in agreeance)
Noel: Okay. So, here’s how we break it down. I already told you about the reimbursement employee expenses. Anything that’s necessary for your job performance or to do your job is deductible if it’s on unreimbursed.
The other one is other expenses. There’s a lot a bunch here. What I want to talk about is toastmaster’s expenses. Very important if you’re not deducting.
If this is something – here’s the rule – that’s the minimum rule. If this is something to improve your skills for your job, it’s deductible. So, from work to here and back, you should be deducting it.
Female: Mileage.
Noel: Yes, mileage. It’s huge. Here’s another thing. If you’re attending conference,
conventions, if you go to Vancouver…
Audience: (Light laughter.)
Noel: You can deduct it.
Female: Really?
Noel: As long as you can document it. How? Travel expenses got to be more than 50 percent of your time. So, if you went to Vancouver for more than 50 percent, meaning you did a lot of – you know – starting Wednesday – to that – it’s all business, it’s all deductible. You just have to document it. Got it?
Alright. (Still holding paper.) This – so, I’ll e-mail you everything. That’s all I have.
So, in closing, the 3 Ms is a perfect example of how Uncle Sam takes away your money. Mortgage interest, medical expenses and miscellaneous expenses. Try to apply what I told you today so you can take more money back.
So, here’s the last thing I have to say - behind every successful man stands a woman and Uncle Sam.
Audience: (Laughing.)
Noel: One takes the credit, the other takes the cash.
Audience: (Laughing/ clapping.)
Noel: If you like to learn more, click the link lowermytaxnow.com, and subscribe to my
weekly blog. Until then, this is Noel Dalmacio, your ultimate CPA of Lower My Tax Now.
Last Updated by Admin on 2017-10-04 08:48:55 PM
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Did you own an existing home that you bought less than two years ago? And because of some unforeseen situations, you are force to sell it. Worse, now you are worried about the potential tax that you will be paying on the sale.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
In order to claim the $500,000 capital gain exemption on the sale of your home, you need to use and own it for two out of the last 5 years. Now, if you did not meet the 2-year rule when you sold your home, you can use the “reduced exemption” rules in order to avoid paying taxes.
A reduced exemption is available if the reason why you sold your home was due to:
- Change of employment
- Health
- Death
- Loss of job
- Divorce
- Multiple births
- Others
The reduced exemption is calculated by dividing the total number of months you owned and used it over twenty four months. Here’s an example: Donald owned and used a property in Washington, DC for 12 months. Due to job relocation (he will go back to New York) he sold his property. Because the move was job-related, he qualifies for the reduced exemption.
Ratio
12 months (Number of months owned/used) = 50%
24 months
Exclusion
$500K (capital gain exemption) x 50% = $250,000
Donald can exclude up to $250,000 of gain on the house he bought in Washington DC.
So make sure that you apply the “reduced exemption” rule in case you sell your home for less than two years.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-09-14 09:17:23 PM
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Do you have an existing student loan that you want to pay-off? There is one strategy that you might want to use to pull this off.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Due to the lower interest rate, consolidating your student loan debt by using a mortgage refinance is one of your best options. However, before pursuing this option, here are the pros and cons that you need to consider:
Pros
- Take advantage of lower interest rate – if your student loan interest rate is higher than your mortgage rate, then you can save money.
- Lower monthly payments – by consolidating and having a lower interest rate and longer term, your monthly payment will be lower.
- Tax deductibility of the mortgage payment if structured as home equity loan. Equity loan up to $100K is tax deductible no matter how you used the proceeds for.
Cons
- You are converting an unsecured debt (student loan) into a secured debt (mortgage) once you consolidate it via mortgage refinance. If you cannot pay for your home, you are putting your home at risk of foreclosure.
- Pay more interest if you consolidate. If your student loan has 10 or 15 years, you will be extending your payment period to another 15 or 20 years. That means you will be paying more interest over time.
- Incur refinance closing costs. Need to account for additional closing costs when analyzing the benefit of consolidation.
So if you decide to do this, please carefully consider the pros and cons before consolidating your student loans with your mortgage refinance.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-09-14 09:17:43 PM
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Do you have an existing business or were issued a 1099 but you decided to ignore it and not report or file any tax returns?
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
The Franchise Tax Board (FTB) sent letters to over 41,000 California businesses that have not filed their 2015 CA income tax return. Business non-filers have 30 days to file a tax return or show why they are not required to file.
If you disregard the letter you will be assessed penalties, fees and interest based on income and other information reported to the FTB. The FTB receives information from the IRS, EDD, BOE, financial institutions, cities, and other businesses and matches the information against its own tax record to identify potential non-filer corporations, LLCS & sole proprietors.
The FTB may also estimate your income if you hold a license. They will base it on the average income of someone with that license. For example, if you have a real estate license, the FTB will assess tax based on what they believe a real estate sales person earns. That’s messed up, right?
For first-time non-filers, the FTB will send you a “request to file” letter. If you don’t respond within 30 days, the FTB will sent a notice of proposed assessment with tax, a late filing penalty and interest but no demand penalty or filing enforcement fee.
For repeat non-filers, the FTB will send you a “demand to file” letter. If you don’t respond within 30 days, the FTB will sent a notice of proposed assessment with tax, a late filing penalty, demand penalty and a filing enforcement fee.
Now let me tell you this, all these penalties and interest, they quickly add up. So what do you need to do? If you received one of these notices, you can request more time to respond to get more information by calling 866-204-7902 or go to FTB’S website at www.ftb.gov.
Normally, most of these penalties are available for reasonable cause exemption so you can waive the penalties. However, reasonable cause exemption is almost impossible to get in California since California does not conform to the IRS first-time penalty abatement program.
Also, the FTB also said that just because you do not understand that you have a California filing requirement is not a ground for reasonable cause exemption.
So here’s my tax tip to you, if ever you receive an FTB letter, please do not ignore the letter. It would not magically disappear or go away. Trust me on this! So make sure you address it ASAP in order to minimize any potential interest and penalties.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-09-14 09:18:25 PM
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Here’s a tax question I got from one of my clients: “I’m paying almost 10% CA income tax. If I buy a second home in Nevada, can I claim Nevada as my resident state?”
Great question!
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
You know what she’s trying to do right? She wants to avoid paying the CA tax and take advantage of Nevada’s “0” state tax! I don’t blame her! So, what’s the answer to her question? Well, I will answer it with my two favorite words: “it depends”. Here are few things you need to consider if you want to be a resident of a tax-free state:
Document it – you need to show that you spend more than half a year in the state that you consider your permanent home. You need to keep a diary or a log showing the number of days you spend in each state.
Prove it – in order to prove your new state residency, you need to do the following: change your driver’s license & car registration, register to vote, apply for a library card, find a new doctor in the new area, file a Declaration of Domicile (intent to live), open a local bank account, shop locally, get a hunting or fishing license, cut ties with the old resident state.
There you have it. So try to document and prove it if you want to become a resident of a tax-free state.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-08-23 06:07:40 PM
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Are you planning to rent out your home this summer? You see, summertime is the time of the year when people usually want to rent out their property. But before you jump and do it, there are some tax issues that you need to be aware of.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Here are some tax issues you need to be aware of when you rent out your primary or vacation home:
- If you use your vacation home solely for personal use, then it’s treated like a second home and the mortgage interest, real estate taxes, points & private mortgage insurance (PMI) will be tax deductible.
- Now if you decide to rent it out, it becomes a little bit tricky. Here are 3 tax scenarios that can play out once you start renting it out:
- Tax-Free Income Property
The first one is called tax-free income property. If you rented the vacation home for 14 days or less during the year, you don't have to report the income. You get tax-free income! You can generally deduct mortgage interest, real estate taxes, points & private mortgage insurance but you can't deduct any other rental expenses.
- Rental property
The second one is called rental property. If you use the vacation home personally for LESS than the greater of 14 days or 10% of the time the home is rented, all rental expenses are deductible.
Example: You stayed in your vacation home 18 days last year. It was rented at fair market value for 190 days. In this example, your personal use was less than the 10% limit (19 days). Therefore, your rental deductions are tax deductible.
- “Expenses claimed limited to income” property
The third one is called “Expenses claimed limited to income” property. If you use the property personally for MORE than the greater of 14 days or 10% of the number of days it's rented, the rules change. Your rental deductions are limited to the amount of your rental income. However, the personal-use portion of taxes and mortgage are still tax deductible on your return.
Example: You stayed in your vacation home 20 days last year. It was rented at fair market value for 190 days. In this example, your personal use exceeded the 10% limit (19 days). Therefore, your rental deductions are limited to the rental income you received.
TAX STRATEGY - If you rent your home to your business for 14 days or less, your business can deduct the payment as business expense. However, the rental income you received will be tax-free! Best of both worlds!
There you have it. Make sure you review and listen to this video blog to make sure you understand the tax issues before renting your property out. If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-07-27 12:09:19 AM
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I got this tax question from a client recently: “Should I include my kid’s’s name on my home?”
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
You see, you might think it’s a good idea to include your kid’s name on the title of your home in case something happens to you. However, that might be a bad idea. Here are five reasons why:
No gain exemption
You are allowed to exclude up to $250,000 of gain on the sale of your home ($500,000 if you are married). However, the exclusion is only available if you owned and used it for at least two out of the last five years. So if your kid does not live in your home for that time period, the portion of his/her gain will be fully taxable.
Home equity risk
If your kid got title to your home as a full or partial owner, a creditor may file a lien on the property for any of your kid’s debts. Worse, your home could be lost if your kid is involve in an accident or a lawsuit.
No control
If you transfer the full title to your kid, your kid will now have 100% control re: your home. If your kid decides to sell the property or take out a loan against your home, you cannot do anything about it.
Medicaid issues
Under some scenarios, if you gift your home to your kid, it could be considered a gift for Medicaid purposes. That means, if you kid subsequently sells your home, you might not qualify for Medicaid benefits in the event of a major long-term health problems.
Gift tax return requirement
If your kid received more than $14,000 of equity in your home as a gift, you need to file a gift tax return. However, regarding the gift tax payable, you can use up your $5.5 million lifetime exemption in order not to pay any gift taxes.
So the question right now is: “What is the LowerMyTaxNow strategy?” If the purpose of the title transfer is for your kid to easily get the home at your death or so your kid can manage your affairs, then I would recommend setting up a living trust, along with powers of attorney, so your kid can manage your financial affairs.
If the reason is to help your kid buy his or her first home, a better way is to lend your kid the money with an IRS-approved interest rate (low and reasonable), and set up a program to give annual gifts in the form of principal forgiveness.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Tax on 2017-06-07 06:03:32 PM
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Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Have you ever wondered why President Trump does not want to release his tax returns. He claims that you, “don’t care at all” even though he is the first president in more than 40 years not to release his returns. So you might be thinking, what gives? That is a great question! And on this blog, I will discuss the top three reasons why he won’t release his returns. Ready?
- Paid “zero” taxes
He reported a billion dollar loss in the 1990s that could have offset all his income for up to 18 years. Being a real estate investor, it gave him the opportunity to apply powerful tax breaks such as depreciation and like-kind exchanges so he can delay, minimize or zero out his taxes. He proudly declared that not paying taxes makes him smart.
- Potential conflict of interest
With more than 500 businesses according to his financial disclosure form, it will be hard to zero in if there is a conflict of interest in regards to his own financial interest versus the nation’s’ interest without reviewing his tax returns and the supporting documentations. Trump’s tax returns might reveal how much he owes to foreign investors like Russia — and how much his connection undermines American national interests.
- Proposed tax plan benefit
In reviewing his proposed tax plan, you would start to wonder, how much will he personally benefit? There are three parts of his tax plan that would be a financial windfall for Trump. Here goes:
- Eliminate alternative minimum tax (AMT) – this prevents rich people from taking advantage of excessive tax breaks. Without the AMT, Trump would have paid just a 3% tax rate in 2005, instead he paid $31 million in AMT taxes.
- Business tax rate will drop from 35% to 15%. This is called the “Trump Loophole” since he will save millions of dollars annually from his 500+ business entities.
- Eliminate estate tax permanently – that means his family and heirs will be billion dollars richer if the estate tax is eliminated.
There you have it. Those are the top three reasons why I think President Trump would not release his tax returns.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Tax on 2017-05-24 07:22:20 PM
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Did you see the news re: the proposed tax plan? You might be thinking, what does this really mean? And how is this going to affect me?
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
The White House presented the new tax plan last Wednesday. And compared to what I’ve discussed last November, 2016, there were not a lot of surprises. Now, the thing with a proposal is, they have a lot of work to do, before it becomes final. Because as of right now, we don't know if this is going to pass or if it passes when it will be a law. So with that in mind, I would not tell you about the highlights but would tell you instead the winners and losers with the proposed tax plan. Here goes:
Winners
- * Businesses with high tax rates - from 35% corporate income tax to 15%
- * High-income earners – income around $470K then your tax rate will drop from 39.6% to 35%
- * People with creative CPAs – this might open up a tax loophole since taxpayers might want to be structured as an S-corporation
- or LLC instead of employees.
- * Multimillionaires who want “0” estate tax – this would take care of your taxes, if your estate is more than $5.5 million or $11
- million for couples.
- * People who are subject to AMT – the one who will benefit the most are high-income earners that have deductions subject to
- AMT adjustments (meaning you need to add back your deductions because you are not getting any tax benefits for AMT
- purposes).
- * Donald Trump – surprise, surprise! All the items that I just mentioned just now will have a huge impact on Donald Trump’s
- taxes.
Losers
- * Upper-middle-income people with high state tax rate – because the state tax that you are paying will not be tax deductible.
- * Non-profit and charitable organizations – with the new proposal, the charitable deductions will be limited.
- * Taxpayers – national revenue would decrease by $6.2 trillion over a decade. That means a large increase in the national debt
- or huge decrease in federal spending.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Tax on 2017-04-28 07:56:24 PM
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Have you filed your 2013 tax returns yet? If you have not filed yet - STOP, and make sure you listen to this so you don’t lose your refund.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
According to the IRS, if you are one of the nearly one million taxpayers who failed to file a return for 2013, then you are in danger of losing your refund. Tax law provides a three-year period limit beginning from the tax due date to claim a refund when no return is filed. That means, since your 2013 tax return due date was April 15, 2014, you are given up to three years from the due date, to file on or before the April tax deadline – April 18 of this year – or the chance to claim the refund is gone for good.
Now here’s the twist, for a refund - there’s a three-year limit, but if you owe money – there’s no time limit until you file your taxes. So what’s the LowerMyTaxNow tax strategy? File your 2013 tax returns before April 18.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-04-12 05:31:17 PM
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Do you know someone who got victimized by a tax scam? I got to tell you, for the victim, it’s pretty scary! Since by the time you figured out that something is not right, the IRS imposter already cleaned your wallet! So how can you avoid it?
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Fake IRS phone call is one of the most common scams. You need to be careful of phone calls or voicemail messages from someone who claims to be from the IRS. Often these criminals will say that you owe money and they will demand immediate payment. Other times, they will lie to you and say you have a refund. They will ask for your bank information over the phone.
So in order for you not to fall for these scams, here are some tips that you can use:
IRS will NOT:
- Call you demanding that you pay them right now. IRS usually correspond via mail.
- Demand payment without giving you the chance to ask question or appeal the amount you owed.
- Ask for your debit or credit card numbers over the phone.
- Require you to pay your taxes with a prepaid debit card.
- Threaten to contact your local police to arrest you for non-payment of taxes.
- Threaten you with lawsuit.
If you don’t owe or think you don’t owe any tax, you should:
- Contact the Treasury Inspector General for Tax Administration or TIGTA. You can go to www.treasury.gov/tigta and use the TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
- Report what happened to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" to the comments of your report.
To summarize, tax scams usually reach it’s peak during tax season. So, in order for you not to fall for these scams, please review and use the tips that I’ve discussed so you can avoid being a victim.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-03-22 05:56:47 PM
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Did you get married, divorced or adopted a child last year? If yes, please make sure you do this important step, before filing your taxes.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
If you or your dependent had a name change last year, please notify the Social Security Administration (SSA) before you file your taxes with the IRS. If the name on your tax return does not match the SSA records, the IRS is likely to notify you about the mismatch. How does that affect you? Well, your expected refund could be delayed. So if you had a name change due to marriage, divorce, or child adoption, please file Form SS-5 with the SSA to update your information.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-03-15 07:05:54 PM
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Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
The Consumer Financial Protection Bureau has created two new forms for borrowers applying for a mortgage loan. The new forms, Loan Estimate and Closing Disclosure, replaced the HUD-1 statements. The new forms have been in use since October 3, 2015.
The Loan Estimate must be given within three business days from the date you submit your loan application. It was designed to help borrowers understand the key features, costs and risks of the mortgage loan. On the other hand, the Closing Disclosure must be provided at least three business days before the loan closing date. It was created to help borrowers understand all the transaction costs of the loan. Part 1 of the Closing Disclosure looks the same as the Loan Estimate. The purpose of that is to make it easy for you to review if the estimated costs changed compared to the final closing costs.
So if ever you did any purchase, sale or refinance for this year. Make sure you provide your CPA or tax preparer the Closing Disclosure form that would show the purchase/sales price of the property and the related closing costs.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-03-03 12:54:31 AM
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Have you ever filed your taxes and after you received your refund, you got an additional tax documents in the mail?
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
If that ever happened to you, here are your two options:
- 1. File an amended return - if you received an additional W-2s, 1099s or K-1s (a K-1 shows your income portion from either an S-corporation, partnership, LLC or trust), then you need to amend your returns to report the additional income. Ignoring and not reporting the forms might result in increased additional interest and penalties.
- 2. Ignore the forms - if you received a form that shows a minimal income (interest or dividend income or losses on K-1s, then I would recommend ignoring the forms. Since amending the return would result in tax preparation fees, you need to determine if it makes sense to amend your returns.
There you have it! Now you know how to address it, if ever you receive a tax documents after filing your taxes.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Last Updated by Admin on 2017-02-22 07:06:17 PM
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Have you ever worked as an independent contractor and you were not given a 1099 form to report your income? What do you do? Do you report it or ignore it?
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
If that ever happened to you, my recommendation is to report your 1099 income. It does not matter if the one that hired you did not issue you a 1099, it’s still your responsibility to report the income. You might be thinking: “But the IRS did not receive a copy of the 1099, that means, I got tax-free income! No need to report it!”
Unfortunately, here are the tax traps that you need to consider:
- Longer audit periods - if you did not report more than 25% of your income, the IRS have 6 years to audit your returns instead of 3 years.
- Multiple-year audits - if you get audited, there is a potential that the IRS will go back three years or six years, if applicable to determine that you did not omit any income.
- Interest & Penalty assessment - you will be assessed various interest and penalties based on the amount that you omitted. For every dollar that you saved from omitting the income, the IRS wants around $1.70 or more.
To summarize, not reporting your income can expose you to longer audit periods, multiple-year audits and penalty assessments. So please, report your income.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Last Updated by Admin on 2017-02-15 07:17:35 PM
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Are you starting or planning a new business this year? If yes, make sure you consider these five items into account.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
- Business plan. You need to outline who will own the business and what the legal structure will be, your qualifications to run the business, the competitive market you face, the products or services you will sell, and how you intend to advertise to prospective customers. Also, how much cash will you need to start up and where will those funds come from? These are important questions that you need to answer and address before starting your business. Keep this in mind: no answer, no business!
- Legal form. You can form a corporation, or operate as an LLC, a partnership, or a sole proprietorship. However, you need to consider both tax and non-tax reasons for selecting a given business structure. These means, you need to know your priority. Do you want to maximize tax deductions? Is the priority legal protection? Are you going to sell the business to a competitor in the next few years? Do you want to minimize your estate tax? Are you going to go public? So make sure you know the goal in mind.
- Location. If your business will consist only of online sales, then your corporate office can be wherever you are. However, if your business needs foot traffic to thrive, you'll need to research rents and other costs such as utilities, as well as zoning and traffic restrictions.
- Taxes. You'll have to work with the IRS, state tax agencies, and local governments to obtain permits and business licenses.
- Advisors. You need to create a business financial team that includes a banker, an insurance agent, an attorney, and yours truly, your favorite accountant. So make sure you involve your advisors early and frequently.
To recap, starting a new business can be very challenging, but by considering these five items, you can put yourself on the path of an aspiring business owner. Good luck!
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-02-08 06:22:39 PM
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Do the following three items apply to you?
- Are you claiming your dependent children?
- Did you pay for any education expenses?
- Did your family income situation change and it’s lower than $50K?
If yes, then IRS would want to know and want to have more information.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
When you are claiming your children for tax credit purposes, you may be asked how long your children lived with you over the past year, or whether they lived with an ex-spouse, relatives or other guardian.
Now for education purposes, which can give you up to $2,500 of tax credit, you are now required to provide Form 1098-T from the college or university. You will also need receipts for related expenses. No Form 1098-T, no tax credit.
Lastly, if your family income drastically changed and it’s under $50K and as a result, you were entitled to earned income credit (EIC), you may be asked additional questions regarding your dependents’ social security numbers and dates of birth. Why? Because these two items were the major source of what the IRS calls "improper payments or refunds."
IRS estimates that of the $66 billion in EIC funds paid in 2015, nearly a quarter or $16.5 billion were collected by filers who didn't qualify to receive them. As a result, the IRS is requiring tax preparers aka “yours truly” to ask more questions.
So starting this year, if we don’t document the compliance with these new requirements, I could face fines of up to $510 per return. What?
To summarize, if I asked you more questions than usual or if I requested for additional documents, be aware that it's just a new requirement to claim the above credits.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-02-01 11:08:14 PM
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Are you aware that the IRS did a major overhaul in regards to determining repair versus improvements?
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Since there were a lot of changes, I will just talk about one specific topic for now and the rest will be in my next video blogs. Okay? So, last November 2015, the IRS issued a notice increasing the amount of repair that you can expense out from $500 to $2,500 for tax years beginning 2016.
That is great news! However, I recommend that you have an accounting capitalization policy in place to document the $2,500 that you will expense out. This accounting policy needs to be in place at the beginning of every tax year.
Why am I telling you all of this? Because, in case you get audited, the IRS auditor will be reviewing their 220-page (yes, 220 pages!) repair audit tax guide and will be looking for your policy to determine the following:
- Was it in writing
- Was it in effect beginning of the year
- Was the policy changed to reflect the expense amount from $500 to $2,500
To recap, make sure you have the accounting policy in place to audit-proof the expense items that you are claiming.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-01-25 10:22:18 PM
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Due to recent law change, the due dates for some of the business and information returns have changed.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Here’s what you need to know.
For C-corporations, the new due date will be April 15 (three and one-half months after the end of the taxable year). However, C-corporations with tax years ending on June 30 will continue to have a due date of September 15.
For partnership & LLC returns, the new due date will be March 15. Partnership returns will be allowed a six-month extension. So the extension due date will be September 15.
For S-corporations, the due date continues to be March 15. S-corporations may also request a six-month extension with the same extension due date of September 15.
Lastly, for FBAR (Form 114) re: foreign asset reporting, the new due date will be April 15 and you will be allowed to request a six-month extension up to October 15. However, you need to request an extension since it’s not automatic.
I bet you are thinking right now: “Why did they make these changes?” Honestly, the IRS got good intentions why they are changing the due dates. The goal is to line up with the business tax reality. Partnership & LLC returns were changed from April 15 to March 15 to give you time to prepare your personal returns. And that’s the same reason why the S-corporations continue to have a March 15 due date. On the other hand, for C-corporations, which are normally for bigger companies, they moved it forward to April 15 to give them additional time to prepare their returns.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Tax on 2017-01-25 10:20:00 PM
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Happy New Year! Well, with new year comes with new rules.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
As you begin preparing your final payroll tax returns for 2016, take into account earlier due dates for two common reporting forms.
Forms W-2 for 2016 are due January 31st. The January 31 deadline applies to forms given to employees, as well as those submitted to the Social Security Administration. IRS late penalties will range from $50 - $530. Ouch! While CA will charge $50 per return. So watch out!
Forms 1099-MISC with non-employee compensation in Box 7 are due January 31st. The January 31 due dates applies to forms given to the recipients, as well as paper and electronic copies filed with the IRS. Please note that this due date applies only to 1099s that report amounts in box 7. The due dates (end of February) remain unchanged for the other boxes. Now, if you don’t have the proper information of the recipients, make sure you provide them a copy of the W-9 Request for Taxpayer Identification Number so they can fill it out and return it to you ASAP.
Why? Well, there is a $260 per return federal penalty for failure to file the 1099s. If filed within 30 days of the due date, the federal penalty is reduced to $50 per return. To make it worse, California conforms to these due dates. And they have their own applicable penalties. For 1099s it’s $100 for failure to file, $30 if filed within 30 days of the due date.
So watch out! Make sure you file the W-2s and 1099-Misc with non-employee compensation by January 31st to avoid incurring penalties.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Tax on 2017-01-04 11:50:18 PM
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Imagine your rich parent or relative gives you a real estate property, vacant lot or stocks. And then a number of years later, your parent or relative dies and you decide to sell the gift. Your tax preparer says you'll need to calculate capital gains on the sale, and asks for your basis to offset it with the sale. So here’s the question: “What's your basis?”
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Basis is the amount of capital investment in the property which is commonly called the purchase costs. So when you sell a property or stocks received as a gift, the general rule is that your basis is the donor's cost basis or purchase costs. So if you sell it for a gain, you need to use the donor’s basis or costs. But if you sell at a loss, your cost is the lower of the donor's basis or the fair market value on the date you received the gift.
But without cost records, you have no way of proving the donor's basis and no way of saving yourself tax dollars.
So what do you do? So next time, when you receive a gift, explain why you need the cost basis to make the conversation less awkward. No one likes to pay unnecessary taxes. So I recommend having the same conversation about the cost of valuable gifts you received in prior-years. That’s very important!
Now conversely, if you're the gift-giver or the one giving the gifts, offer the additional gift of presenting the cost records to your recipient at the same time. Otherwise, you may end up giving an unintended gift to the IRS in the form of…unnecessary taxes.
There you have it. So next time, when you receive a valuable gift like a property, vacant lot or stocks, ask and inquire about the cost records so that at the time of sale, you will avoid unnecessary taxes.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2016-12-02 09:45:21 PM
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A tax client asked me: “Should I convert my IRA or retirement plan into a Roth IRA? That is a great question! However, as with any tax questions, it is impossible to have a definite answer when deciding whether to convert a traditional IRA or retirement plan into a Roth IRA.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
You will generally benefit from the Roth IRA conversion if ALL of the following applies to you:
- You don’t need to take withdrawals from your Roth IRA for at least 15 to 20 years;
- Your future tax rate when you take out withdrawals is the same or greater than the rate during the conversion and
- You can pay the tax on the conversion with non-retirement funds
If you meet all the criteria, congratulations! This is one powerful tax strategy that if you apply correctly, will definitely, build you tax-free wealth!
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2016-11-16 06:53:55 PM
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Have you ever done a home-based business before? And you were required to fill-out form W-9 to provide your name and social security number so you can be issued a 1099 during tax time.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Here’s a LowerMyTaxNow strategy on how to properly structure your tax ID when starting a business.
I would recommend applying for a separate tax ID number with your preferred business name. Make it a generic name so you can use it for your existing or any future businesses. Fill-out form SS-4 and you can go to irs.gov for both the forms and instructions.
I know what you are thinking. Your million dollar question is: “why?” Answer: identity theft. The sole purpose of doing this is to prevent any identity theft in the future. You want to avoid providing your social security number as much as possible.
There you go! That is my LowerMyTaxNow strategy that you can use when you start a home-based business.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2016-09-16 08:38:18 PM
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Have you ever received an IRA distribution with the intention of “rolling it over” or depositing it into another IRA account but you missed the 60-day rollover rule?
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Under this rule, you're required to complete the rollover within 60 days of receiving the distribution. If you miss the deadline, tough luck, you have to report the distribution as income and perhaps pay a penalty. Ouch!
In the past, you had to request a special statement from the IRS to avoid that outcome. Now, the IRS says you may qualify for a waiver if you meet one out of eleven allowable reasons. Here we go:
1. Error was committed by your financial institution
2. Distribution check was misplaced and never cashed
3. Distribution was deposited into an account that you thought was an existing retirement plan
4. Your principal residence was severely damaged
5. A family member died
6. You or a family member was seriously ill
7. You went to jail
8. Restrictions were imposed by a foreign country
9. Postal error occurred
10. Distribution was due to IRS levy and then the proceeds was returned by the IRS
11. The party making the distribution delayed providing information that delayed the rollover
There you have it! So next time, if you missed the IRA 60-day rollover rule, please look into the eleven allowable reasons to get relief.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2016-09-08 09:36:38 PM
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Are you aware that there is a tax code that can potentially “0” your taxes?
If you are a real estate investor and working in a real estate business, you are in a unique position to take advantage of this powerful tax strategy that could potentially “0” your taxes. It’s called the “real estate professional” designation.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Under this law, if you are a real estate professional, you can fully deduct rental losses against your W-2, business income and other income without limitation. What does that mean? It means, if you understand the tax rules and apply it correctly, you can potentially “0” your taxes.
REQUIREMENTS:
1. 50% test – You must spend more than half (51%) of your working hours in a real property trade or business like purchase, rental, management or sales.
2. 750-hour test – You must spend 751 hours in real property trade or business
3. You must be at least a 5% owner of real property trade or business
4. The 50% test and 750-hour test must be met by only one spouse in the case of married taxpayers
5. You must materially participate in the management operations of your own rental real estate. Married couples can combine their hours to meet the material participation hours.
To recap, a “real estate professional” designation is one of the most powerful tools that you can use in order to legally zero out your taxes! So make sure you understand the rules and keep good records.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2016-09-01 06:07:55 PM
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Do you know someone that recently passed away? Do you know that after your death, the distribution of retirement accounts, life insurance policies, annuities, and bank and investments accounts are guided by beneficiary designations. If those designations are outdated, unspecific, or wrong, your assets may not be distributed the way you would like.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Here are three items to consider:
Be specific and stay current. When you name a beneficiary, your assets can pass directly to that person or entity without going through a legal process called probate. So make sure you update the designations for life events such as divorce, remarriage, births, deaths, job changes, and retirement account conversions. Likewise, keep your beneficiary designation forms in a safe location, and maintain current copies with your financial institution, attorney, or advisor.
Think about unexpected outcomes. You have to be alert for the effect of taxes. For example, if the money in your accounts is distributed directly to your heirs, they may be stuck with a large unexpected tax bill. If you are wealthy, estate tax may also play a role. In 2016, the estate tax exclusion is $5.45 million and the top estate tax rate is 40%. Another concern: If one of your designated beneficiaries is disabled, government benefits may be reduced or eliminated by the transfer of assets. You may want to consult an attorney to establish a special needs trust to ensure your loved one is not adversely affected.
Name contingent beneficiaries. If your primary beneficiary dies, having a backup, or contingent, selection will ensure that your assets are properly distributed. In some cases, a primary beneficiary may choose to disclaim, or waive, the right to the assets. In that case, contingent beneficiaries can step up to primary position.
Beneficiary designations are an important part of estate planning and the items we have discussed will ensure that your wishes and intentions will be followed.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Tax on 2016-08-24 05:46:31 PM
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When you go out and eat, put gas in your car or pay for your business expenses, I’m going to assume that you are either using a credit card or a debit card. In your mind, you might think they are the same. But there are differences that you need to be aware of.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Here are some differences that you need to be aware of:
- Cash availability and fees
With a credit card, the money is not immediately taken out from your bank account. And as long as you pay back the credit card company within the allowed period, you won't be charged interest on the money owed. And you don't want to make a late payment – interest can build up quickly on credit cards.
In contrast, debit cards are linked to your personal bank account, so you're using your own money and the charges are automatically deducted from your account. However, you might be charged extra fees on top of interest for any overdrafts.
- Personal finance and budgeting
Earl Wilson said that there are three kinds of people: “The haves, the have-nots and the have-not paid what they bought.” You don’t want to be in the last group!
With credit cards, you might tend to overspend since you have available cash in a form of a personal loan. On the other hand, because you don't carry a balance on the debit card, you're more likely to stick with your budget and not overspend.
- Consumer liability protection
Federal laws protect you in the event you need to dispute credit card charges and usually cap your liability at $50. Debit cards offer fewer protections than credit cards, including a sliding scale of liability depending on when you notify your financial institution.
Which card is best for you? The answer is generally a mix of the two is a good compromise. You can use a credit card wisely to bolster your credit, while still paying for everyday purchases with a debit card.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.co
Last Updated by Admin on 2016-08-17 05:43:08 PM
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Can you deduct a work-related education costs?
I got this question from one of my clients. So as an accountant, I will answer you with my favorite words: “It depends.”
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
So, are you planning to go back to school to get an advanced degree or just to brush up on your work skills? The answer to those questions, will determine if you might be able to deduct what you pay for tuition, books, and other supplies.
So, if you're self-employed or an employee, you may be able to claim a deduction if the training is necessary to maintain your skills or is required by your employer.
However, just remember that even when the education meets those two tests, if you're qualified to work in a new trade or business when you've completed the course, your expenses are personal and nondeductible. That's true even if you do not get a job in the new trade or business.
Work-related education expenses are an itemized deduction when you're an employee and a business expense when you're self-employed. You may also be eligible for other tax benefits, such as the lifetime learning credit.
So next time you plan on going back to school, just make sure you understand issues re: work-related education.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Admin on 2016-08-10 05:49:49 PM
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Are you working for someone or are you working for yourself?
In regards to retirement plans, there are some things you need to be aware of so you can take advantage of the situation.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Here are three things you need to consider:
- Maximize employer matching. If your employer offers a 401(k) plan, try to put in at least the contribution amount in order to receive the maximize amount your company will match. Consider this free money! This also applies to self-employed. You can set-up a profit-sharing plan that will allow you to contribute up to 25% of your salary. This is tax deductible to the business but not taxable to the employee. It’s a win-win!
- Try to catch-up. If you're age 50 or older, you are allowed to make extra contributions to your retirement plans. These "catch-up" contributions depend on the type of retirement plan. Here is the list of catch-up items: IRA - $1,000, Simple - $3,000, and 401-K & 403-b - $6,000.
- Maximize total contribution limit. The total limit for 2016 is $53,000. So if you are an employee, try to take advantage of any of your company’s retirement plans. Now, if you are the employer, try to structure different plans in order to maximize your contributions up to the limit.
There you go! Consider these strategies the next time you look into your retirement plans and I guarantee you…you would say…I lowered my tax now!
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Admin on 2016-08-09 09:28:18 PM
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If you hold foreign bank or financial accounts, or have signature authority over such accounts, and the total value of all your accounts exceeds $10,000 at any time during the calendar year, you may be required to file a Treasury Department report known as the FBAR.
It's easy to overlook this requirement because it's separate from your federal income tax filing, with a different deadline and strict rules."FBAR" refers to Form 114, Report of Foreign Bank and Financial Accounts. Your Form 114 must be filed electronically with the Treasury Department no later than June 30. No filing extension is available. So, please watch out for the filing requirement due date.
Last Updated by Admin on 2016-06-28 08:22:22 PM
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Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Do you own a rental property where you have “used up” most or all of your depreciation? You want to sell the old property and buy a new one so you can start benefiting from the depreciation deduction again. You’re thinking: Can I do that? Answer: Absolutely!
Here are 3 tax strategies that you can use:
1. Take advantage of the suspended rental losses – if your income is more than $150K, the IRS will suspend your current rental losses and will be carried over to future tax years indefinitely (exception applies for RE professional). Any carried-over rental losses not used can be claimed if your income will permit or fully expensed during the year you sell the property to offset potential capital gains.
2. Key tax rate – if you are in the 10%-15% tax bracket and you held the rental for more than a year, then you can pay “0” capital gains rate. Yes! You heard that right…zero! The key here is proactive planning. Make sure you postpone some income and increase your deductions in order to be in 10%-15% tax rate.
3. Installment sale – you can spread and report the capital gains over a number of years in order to spread the tax and create a future revenue stream.
To recap, take advantage of the strategies above so you can minimize or spread your taxes and start getting the tax benefits from depreciation deduction again.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Last Updated by Admin on 2016-06-22 06:37:15 PM
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Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Do you have a rental property that appreciated in value that you want to sell?
You want to pull the trigger but you are afraid of the tax you will be paying on the gain. What can you do?
Millionaire investors used this strategy to build their real estate portfolio. It’s one of the most powerful tax savings strategies available to you. It’s called: 1031 exchange.
A 1031 exchange allows you to postpone your taxes by exchanging up to another higher-priced rental property. It’s a way to consolidate and build your real estate investments without paying taxes. It’s a two-step process: first step, sell your property, second step, reinvest the cash proceeds in a new property.
Here are 6 additional things you need to know about 1031 exchanges:
- Must be investment property (enter in slide) - It’s only for rental, investment or business property.
- 45-day rule (enter in slide) - Replacement property must be identified within 45 days of the sale of the old property. There are no extensions allowed.
- 180-day rule (enter in slide) - It must also be purchased within 180 days of the sale of the old property.
- Qualified intermediary requirement (enter in slide) - To qualify for the tax deferral, you must hire a qualified intermediary (commonly called an exchange accommodator or QI).
- Cash receipt is taxable (enter in slide) – Any cash you received or taken out during the exchange is taxable.
- Consider mortgages and other debt (enter in slide) – If you don’t receive cash back but your mortgage balance went down, that will be treated as income. For example, you had a mortgage of $500,000 on the old property, but your mortgage for the new property is only $400,000. You have a $100,000 of taxable income. (show slide)
To recap, a 1031 exchange is a very powerful tool, that if you use wisely, can save you thousands of dollars come tax time.
However, you have to pay strict attention to the rules of qualification. Otherwise, you could find yourself in some trouble with the IRS.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Last Updated by Admin on 2016-06-16 12:50:30 AM
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Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow
Did you have a parent, relative or sibling that passed away and they transferred their IRA account to you?
If you inherited an Individual Retirement Account, IRA for short, from someone other than your spouse, you may be surprised to learn you have to take annual distributions.
That's generally the case whether the IRA is a traditional or a Roth account.
The problem sometimes is the brokerage company does not know the tax rules for inherited IRA.
And if you fail to take the distributions as required, you may owe a 50% penalty of the amount you should have taken.
Therefore, to avoid the penalties, make sure you take out timely distributions from the inherited IRAs.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Last Updated by Admin on 2016-05-13 01:30:35 PM
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Looking to minimize tax clutter?
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Here are 4 recordkeeping guidelines that will help you do just that while retaining what's important.
- Income tax returns. Keep these at least seven years. Hang on to the back-up documents, such as Forms W-2, mortgage interest statements, year-end brokerage statements, and interest and dividend statements, for the same amount of time.
- Supporting paperwork. Keep cancelled checks, receipts, and expense and travel diaries for a minimum of three years.
- Stock, bond, or mutual fund purchase confirmations. Retain these while you own the investment. You can purge them three years after you sell.
- Real property escrow and title statements. Retain these documents as long as you own the property so you can prove your purchase price when you sell. They can be destroyed three years after the date of the sale.
As you purge your financial clutter, be sure to shred or otherwise destroy the discarded paperwork. These documents often reveal your social security number, bank and brokerage account activity, and other personal information that could lead to the theft of your identity.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Tax on 2016-05-04 10:48:29 AM
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Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
If you're required to make quarterly estimated tax payments this year, the first one is due as the same date of the tax filing deadline.
Failing to pay estimates, or not paying enough, may lead to penalties. Here are three things you need to consider:
Do you need to make estimates? If you operate your own business, or receive alimony, investment, or other income that's not subject to withholding, you may have to pay the tax due in installments. Each estimated tax installment is a partial prepayment of the total amount you expect to owe for next year. You make the payment yourself, typically four times a year.
How much do you need to pay? To avoid penalties, your estimated payments must equal 90% of your 2016 tax or 100% of the tax on your 2015 return (110% if your adjusted gross income was over $150,000).
Exceptions. There are exceptions to the general rule. For instance, say you anticipate the balance due on your 2016 tax return will be less than $1,000 after subtracting withholding and credits. In this case, you can skip the estimated payments.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Admin on 2016-04-22 04:01:53 PM
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Here’s a tax question, I got from one of my clients:
Should I donate a vacant land that went down in value?
Here are the facts of the case:
Client bought a vacant land in Florida 10 years ago for $35,000. It’s now worth $5K.
She is feeling charitable and would like to give the vacant land to her favorite charity.
So what do we do?
If she donates her vacant lot, she can deduct the land’s $5k market value as charitable deduction. That is good. However, we can do better.
Here’s the LowerMyTaxNow strategy:
Sell your lot to recognize the $30,000 capital loss ($35K cost less $5K market value). You can deduct $3K of capital loss every year or you can offset these losses with any future capital gains.
Afterwards, you can donate the $5K cash to your favorite charity.
Whoolah! Not only you gave the same $5k value to your favorite charity, but you were able to recognize the loss from the sale of the vacant land.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Admin on 2016-03-16 11:43:38 AM
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Here’s a tax question, I got from one of my clients:
If my kid works part-time, do you recommend funding a Roth IRA?
Hey, that is great question! And it deserves a great answer. Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
If you have a kid who works part-time, encourage your kid to fund a Roth IRA.
You might be thinking, what’s the big deal about a Roth IRA?
We’ll, it’s one of the most powerful retirement vehicle that you can take advantage of.
The contribution is not tax deductible, however, it grows tax-free and when you take out the money at age 60, it’s all tax-free!
What is the income requirement to fund it then?
You only need to have a W-2 or NET business income. Age is irrelevant.
So for 2015 and 2016, your kid can contribute the lesser of: (1) W-2/Net business income or (2) $5,500.
By funding this consistently, your kid can potentially accumulate quite a bit of money by retirement age. However, your kid might not be willing to put in the $5,500 even when they have enough earnings to do so. So just be satisfied if you can convince your child to contribute at least a meaningful amount each year. Remember, if you are so inclined, you can make the Roth IRA contribution for your child.
Here's what can happen if your 15-year-old kid contributes the following amounts:
(Note that it will be worth different values depending on the amounts contributed & annual return)
Annual Contribution Value when child is 60 years old
For 5 Years 3% 5%
$1K $ 28K $84K
$1.5K $ 40K $127K
$2.5K $ 67K $212K
Wow! You get the idea right? With just small annual contributions for five years, Roth IRAs can be worth eye-popping amounts by the time your kid approaches retirement age. That is the power of starting early!
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Admin on 2016-03-09 12:57:57 PM
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Have you been a victim of a tax scam? No? Well, that’s great!
Did you know that during tax time, tax scams usually go up.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Today, you will learn 3 tax scams that you need to watch out for.
Here goes:
The first one is identity theft.
Scammers will use your social security number and personal information to file your tax return and claim a fraudulent refund.
If you get an IRS notice informing you that more than one return was filed in your name and you received wages from an unknown employer those are the signs that you have been victimized.
If you believe your personal information has been stolen and used for tax purposes, you should immediately contact the IRS Identity Protection Specialized Unit. Go to www.irs.gov and visit the special identity theft page on the IRS website.
The second one is phone scams.
Did someone call your home number and pretended to be an IRS agent and threatened you with police arrest, deportation and license revocation if you don’t pay your outstanding IRS bill? Let me tell you, it happened to my associates and my wife. They freaked out!
Just so you know, IRS usually corresponds through mails only. They do not call for any outstanding bills. And they never ask for credit or debit card information over the telephone and they never requests immediate payment over the telephone and will not take enforcement action.
So when you receive this threatening phone call, please hang up or call IRS immediately.
Lastly, phishing. This is the use of unsolicited email about a bill or refund or fake website appearing to be from the IRS. Please do not click on one claiming to be from the IRS. Remember – IRS NEVER initiates a contact by email requesting your personal and financial information. Report such email immediately to phishing@irs.gov.
There you have it. So for this coming tax season, watch out for these top three scams. Be careful when viewing e-mails or receiving telephone calls because scams can take on many sophisticated forms. Keep your personal information secured by protecting your computers and only provide your Social Security number when absolutely necessary.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly video blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow
Last Updated by Tax on 2016-02-24 02:49:31 PM
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Do you know how some high powered people or celebrities file their taxes?
If you say, filing jointly as married couple, then that is an educated guess.
However, for some they choose to file separately. Why? Let’s find out.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Today, you will learn when to file or not to file separately.
Are you ready? Okay.
If you are married, you can elect to file separately at the end of the year.
What are the disadvantages of filing separately?
There’s a lot:
Unfavorable tax rates
You lose various credits
You lose education benefits
Greater chances that your social security will be taxable
IRA’s deductions and contributions phases out at $10,000 of your income
And lastly, your rental losses will be limited to $12,500
So with these disadvantages,
you might be thinking, why do people file separately?
Two reasons: Number one: you might pay less tax by filing separately.
For example, if your spouse has medical expenses or employee unreimbursed expenses,
you might pay less, since these deductions will be limited by the income of your spouse.
Number two: And this is a big one! No joint liability!
If you sign a joint return, you and your spouse is responsible for the payment of the tax.
If you file separately, then you are not responsible for reporting or paying taxes on items related to your spouse.
There you have it.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Tax on 2016-02-19 03:02:53 PM
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Do you have people that you support? Do you know that if you meet certain tests, they may be claimed as your dependent. Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Today, we will talk about how to maximize your dependency deductions.
Here are 3 things you need to know, number 1: Deductions and income limitation.
Each dependent will reduce your income by $4,000 on your 2015 tax return. However, you might lose part of that deduction if you income is more than $309K if you married or more than $258K if you are single filer.
Number 2: Who can be considered a dependent? A dependent is someone you provided more than half of their support; more than 50%. And they are either a qualifying child or a qualifying relative. You need to take advantage of both classifications in order to claim the deduction.
A qualifying child is someone related to you, lived with you, under 19 or a full-time student under 24 or it can be any age if permanently disabled
A qualifying relative is a dependent that either lives with you all year or related to you and they must have income that is less than $4,000.
So you can claim any person not related to you as long as they live with you the entire year and made less than $4,000. While any person related to you like your parents or children does not necessarily be living with you, you just need to provide more than 50% of their support and their income needs to be less than $4,000.
Keep in mind that for your parents that receive social security benefits only, those benefits will be taxed as “0” and would not be considered as income. Make sure you take advantage of both classifications in order to claim the deduction.
Okay. We’re almost on the finish line, here’s number 3: Who can’t be claimed
We’ll, your spouse is never your dependent. In addition, you cannot claim a married person if that person files a joint return with a spouse. Also, a dependent must be a U.S. citizen, resident alien, a resident of Canada or Mexico for part of the year.
Wow! You made it!
For a somewhat simple topic, claiming the deduction for a dependent can be quite complex.
You will want to get it right though, because being able to claim someone as a dependent can lead to other tax benefits, including head of the household filing status, child tax credit, education credits, and the dependent care credit.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly video blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Admin on 2016-02-11 04:14:37 PM
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Guess what? It’s that time of the year again. Nope, I’m not talking about Christmas. I’m talking about one of your favorite things to do: filing your taxes.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Today, you will learn three tips to start your tax filing season. Are you ready?
Number 1. Check whether your kids need to file a 2015 tax return. They'll need to file if wages exceeded $6,300, net business income was over $400, and if interest or dividend exceeded $1,050. However, when income includes both wages and investment income, other thresholds apply.
Number 2. Consider whether you'll contribute to a Roth or traditional IRA. Since you have until April 18 to make a 2015 contribution, you can schedule an amount to set aside from each paycheck for the next few months. The maximum contribution for 2015 is the lesser of your earned income or $5,500 ($6,500 when you're age 50 or older). When funding the IRAs make sure you indicate that this is for the 2015 tax year.
Number 3. Do you need to file a gift tax return?
For 2015, you may need to file a return if you gave gifts totaling $14,000 to someone other than your spouse. Some gifts, such as direct payments of medical bills or tuition, are not subject to gift tax. They are due at the same time as your federal income tax return. There you have it. So just make sure you keep in mind these three tips once you start filing your taxes.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Tax on 2016-02-03 04:33:23 PM
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Do you know the number one secret on how to become a millionaire?
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
The number one secret on how to become a millionaire
is to practice “paying yourself first”.
That means, you pay yourself first by automatically funding a retirement account
and transferring money in your savings account.
That way, before you even have access to your accounts, you already took steps in securing your financial future.
This is a perfect segue to discuss retirement plans.So for 2016, you can contribute $18,000 to your 401(k), plus another $6,000, if your 50 years old or older.
Taking full advantage of allowable contributions and any employer matching is still a good idea. Since contributions you make to your retirement plan reduce your taxable income and also help you build your retirement portfolio.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Admin on 2016-01-27 11:02:47 AM
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Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
While you're gathering information to prepare your 2015 tax return, set aside time for a financial review.
Here are steps to get started.
- Compile a year-end list of your assets and debts and compare the list to last year. Are you gaining or losing ground? What actions can you take to improve your financial situation in 2016? Should you start paying off your credit card debt or adding an extra principal payment on your mortgage payment?
- Review your insurance. Do you have disability insurance to replace take-home pay if you become incapacitated? What about life insurance – will the benefit provide enough cash to pay your family's expenses in the event something happens to you or your spouse? Is your home protected with replacement value property insurance? What about insurance for automobile accidents or lawsuits?
- Update your will and estate plan. What changed during 2015? Did you marry? Divorce? Have a child? Move to a new state? Receive an inheritance? All of these events can affect your planning. This year, you can leave up to $5,450,000 to your heirs with no federal estate tax liability. But that doesn't mean you can ignore estate planning, which includes expressing your wishes for who will make decisions for you in times of emergencies as well as who will receive your assets.
● Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Admin on 2016-01-20 12:48:35 PM
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Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Forms 1099 are due to recipients by February 1, 2016. You may be most familiar with Form 1099-MISC, which you use when your business makes payment over $600 for services to nonemployees. Reportable payments can include fees for services paid to independent contractors, such as consultants, lawyers, cleaning services, landlords and property managers. Generally, you don't report fees paid to corporations, but there are exceptions (payments to lawyers, for example). Lastly, you are required to issue a 1099 to an LLC unless they are tax as a corporation.
If you like to learn more, click the link lowermytaxnow.com and subscribe to my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Admin on 2016-01-14 04:18:54 PM
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Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Guess what? New year…new rates!
The car mileage rates went down from the 2015 rates. Here are the rates that you can use to calculate your 2016 deductions and reimbursements.
For business, the rate is 54 cents per mile. That's down from 57.5 cents in 2015. (What is the IRS thinking?)
For medical and moving, the rate went down from 23 cents to 19 cents per mile.
And lastly, for charitable service miles, it remains at 14 cents per mile.
If you like to learn more, click the link lowermytaxnow.com and subscribe to my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Admin on 2016-01-07 03:19:51 PM
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Hi guys, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
The stock market may not be the right place for all of your money at all times. Here are two situations when cash accounts can be a better solution.
#1. Usually, the stock market is not a good place to invest funds you will need during the next two to three years, such as when you need to pay ongoing living expenses in retirement. In that case, your cash is better invested in money market funds, bank CDs, or bonds with maturities matched to your needs. The plan is to eliminate the risk that you'll be taking withdrawals when the stock market is depressed.
#2. Maintain your emergency fund – three to six months of current living expenses – has only one purpose: to provide the cash you might need for unforeseen events like job loss, illness, or major unexpected repairs. These are situations when you can't afford to wait until the market recovers to get your funds.
However, cash savings has some drawbacks like losing your purchasing power during inflation. And historically, the stock market has provided better returns over long time periods. But those returns come at the price of volatility. If you need to withdraw your savings during a market downturn, you might NOT recover your investment. Wherever you choose to invest your other savings, consider keeping some of the funds you will need in the short-term in less volatile, old-fashioned cash investments.
If you like to learn more, click the link lowermytaxnow.com and subscribe to my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Last Updated by Admin on 2015-12-03 10:21:41 AM
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Catastrophes, thefts, natural disasters, accidents, fires – they happen. If such misfortunes strike, a well-researched and up-to-date homeowner's insurance policy can keep your family's finances afloat during trying times. Proceeds from a homeowner's policy can provide necessary funds to replace your house and belongings. A good policy can also protect against unexpected liabilities. If you're considering a new homeowner's policy (or already have one), watch out for some common pitfalls, including the following:
Inadequate policy limits. Some homeowners try to lower their premiums by purchasing a policy that doesn't fund their home's replacement value. That's often a big mistake. If the cost to replace your home has risen over the years and policy limits haven't kept pace, you could end up footing the bill for much of the replacement cost (or selling your property at fire sale prices).
Personal property not documented. If you need to file a claim, an insurance carrier will want solid evidence that you owned the items being claimed. It's a good idea to take pictures or videos of all your household goods, and keep receipts of all expensive purchases. Place copies of the pictures and receipts in a safe deposit box and at home in a fireproof safe. You might even send copies to an out-of-town friend or relative. Being able to provide clear evidence of your personal belongings will simplify the claims process and help ensure that you get paid.
Valuables not covered. Check your policy to ensure that expensive jewelry, antiques, and other valuables are included. If not, consider adding a rider to the policy that specifically lists such items.
Deductible too low. Generally, the higher the deductible, the lower the premium. True, in the event a claim needs to be filed, you'll pay a bigger chunk of the repair or replacement cost with a high deductible. On the other hand, with a high deductible you'll generally pay lower premiums each year.
By doing careful research and avoiding some common mistakes, your homeowner's insurance policy will be affordable and still provide solid protection should disaster strike.
Last Updated by Admin on 2015-01-28 11:26:34 AM
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Don?t miss the cash discounts offered by your suppliers. A
2% discount for payment in ten days, versus net payment in 30 days, computes to
an annual rate of return of 36%. If you can get a 10% discount for paying
twelve months of payments in advance, you will earn 23% on your prepayment.
Last Updated by Tax on 2012-06-13 11:23:19 AM
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