There is a calculator out there that can come close to what your premium credit might be to help pay for health insurance.  There is also a calculator for the penalty of not having insurance.  There is also a FAQ page that goes over some important details – such as who is exempt and at what level of income you need to have in order to qualify for the credit. You can find it here: Affordable Care Act FAQ and Calculators

If you have any questions on how things may impact you, feel free to contact me.

We all know about our federal income taxes.  If you don’t, let’s all hope that is because you don’t need to pay any.  But there is more – you would be surprised.  This is a tax calculator that will give you a clearer picture of the number and types of taxes you pay and their estimated amounts.

The Total Tax Insights™ calculator (totaltaxinsights.org) is the first-of-a-kind tool brought to you by the CPA profession that will give you a clearer view of your estimated annual tax obligation based on your place of residence across the country. There are more than 20 types of federal, state and local taxes included – some of which may surprise you. When I worked at Revol, I was able to see how many taxes are involved in cell phone service and within the telecommunications industry.  And that was just a slice.

The more you know about the taxes you pay, the greater insight you will have to make better informed financial decisions. You may start thinking differently about a lot of things, such as whether to pay off a mortgage, start a new business or when and how to save for retirement. Give it a try and then let’s talk about whether you are ready to begin the process of planning, managing and building your financial future.

If you need a mileage log, send me a quick message.  I have a large stack here to give out!

Happy driving! (And mileage recording)

529 Contributions

In Ohio it is possible to deduct contributions to an Ohio 529 plan.  But the Ohio tax savings on a $2,000 contribution may not be that great, though.  Still, this is a “do before year end” thing. Hey at least you’re trying to save for college.

Selling Stuff At a Loss

This seems like a standby on any tax savings list you read off Yahoo or other web portals. It annoys me, but yes, you can get some savings from selling investments at a loss and yes this is a “do before year end” thing.  Yes there is that $3,000 a year limit but if you are offsetting similar gains you can skirt around those rules if everything falls correctly. The better option is to not have any investments at a loss that will never generate a gain for you, but hey, it is not that easy is it?

Increase Itemized Deductions

This would also fall under the “you have to spend it in order to save it” theory.  For example, charitable contributions can save a lot of taxes if you do it right, but on the other hand, you have to spend money in order to save money. So it depends on your goals. Remember charitable contributions doesn’t have to be cash.  It can also be items such as bags of clothes, a car, stock, car mileage – many different things.  There are different rules for all of them relating to record keeping and limits on how much you can deduct. (They are pretty high though).  If you hit a limit, though, you can always carry forward to next year.

Sometimes you may be able to pay a half of your real estate taxes in the year prior than you otherwise would.  Certain counties will let you do that. If you are on the cusp of itemizing, you can try to move a payment into a current year and use the standard deduction the next year.  That way you get more bang for your standard deduction.

Another item is to pay your Ohio, or other state, estimated taxes before year end. You can deduct taxes paid to states and cities, so if you generally owe or pay estimates, you can pay before December 31st and move that deduction into 2012.

Bonus Depreciation

Currently the 50% bonus depreciation for new assets expires and will not continue into 2013.  So if you operate at a loss, it may make sense to buy new equipment to get the bonus depreciation in 2012.  That is because bonus depreciation works in a loss scenario whereas Section 179 (another way to write of a capital purchase) does not allow a deduction in a loss scenario.

IRA Contribution

This one still remains as a common way to get a tax break without forever parting with your money.  The deadline is not December 31st, though; it is the due date for your tax return without extensions.  So we can see if it will help you while we calculate the return and you don’t have to guess.  Nice isn’t it?

56.5 cents per mile for business use, thus perpetuating the IRS belief that somewhere out there is a half cent coin. For a tongue-in-cheek but useful article on business mileage, click here.

14 cents a mile for charitable use, unchanged from last year because everyone knows your car uses less gas when you drive it for charity.

24 cents a mile for medical and moving use. You can find this deduction discussed as part of my commonly overlooked medical deductions article.

The IRS Notice can be found here: 2012-72

Happy driving!

http://www.irs.gov/pub/irs-drop/n-12-72.pdf

Happy estimating!

Federal and Ohio: If you are self-employed, or have any other sources of income where tax is not withheld, it is likely you could fall under the rules requiring estimated tax payments. The idea behind it is that at least 90% of your tax should be paid usually by the due date of the fourth installment. Ohio has similar rules.  There is a penalty that could be applied if you do not due this.  So far in 2012 that penalty is 3% for the underpayment.  Some people feel that is low enough just to pay the penalty and not pay estimates, but you need to be careful.  There are safe harbors, exceptions, and different ways to calculate those requirements.  Some exceptions to the penalty are:

• Pay at least 90% of the current tax owed via all means (withholding, credits, etc…)
• Pay 100% (or 110% for higher income filers) of the previous year’s tax liability
• Farmers and fisherman can pay in one estimate by January 17th if 2/3rds of their income is from those sources for the current or prior year.  If they also file by March 1st, the payment can even be by that date
• Tax due is under $1,000 ($500 for Ohio)
• You can vary your payments as you earn the income without being penalized if you feel like filing a complicated 2210 form with your return

Due dates are:

• April 17, 2012
• June 15, 2012
• September 17, 2012
• January 15, 2013

As of this writing, Ohio says on their website that the third estimate is due September 15th, which is a Saturday, and the fourth estimate is due January 17th, where the 15th would be a Tuesday.  Translation: that doesn’t make sense.  I’m pretty sure they made a mistake and intended the due dates to be the same as the federal. It can be found here: Ohio Dept. of Taxation’s Individual Estimated Tax Info

Ohio Cities: Canton, Massillon, and Ohio cities in general have different estimated tax rules for individuals. You are supposed to make quarterly payments that are each 1/4 of the amount due the previous year.  In fact, they want the first one added to the previous year tax liability on the return. Convenient isn’t it?  I can see their logic, but I still see a lot of people leave that off their return anyway and just pay a penalty.  The penalty usually runs $25 plus interest for not paying in at least 75% of the tax liability for a year.  (90% according to CCA forms) Like the federal requirements there is an exception if you pay 100% of the previous year for many cities.  Do cities actually follow through on those penalties? Yes. Not always, but frequent enough that it usually does not surprise me.

Due dates of estimated payments for Ohio cities generally are:

• April 30, 2012
• July 31, 2012
• October 31, 2012
• January 31, 2013

For some reason the due dates for Massillon are all on the 30th and not the 31st.  I’ve only known banks to pretend that all months end on the 30th but I suppose cities can get in on the act too.

Links:

Massillon Estimated Payment Vouchers for 2012

Canton Estimated Payment Vouchers for 2012

North Canton Estimated Payment Vouchers for 2012

Akron Estimated Payment Vouchers for 2012

CCA Estimated Payment Form

My heartfelt thoughts are with you if you really do have to fill out that CCA form.  RITA will generally send you estimated tax bills if you filled out your taxes correctly.  They make it look like a scary tax notice but if you look carefully you can see that it is just an estimated payment voucher.

Have a question? Send me a message!

Well the tax deadline for 2011 tax returns is April 17th, 2012. Yes that is a Tuesday. Yes, that is different than the 15th.  The due date actually varies frequently from the 15th.  For example this time the 15th is on a Sunday, so the due date is automatically put off.  Problem is April 16th is Emancipation Day in the District of Columbia. So the due date gets pushed off again.  I am not complaining about that one.

But even though it is only a District of Columbia holiday, Ohio, Canton, Massillon, CCA (Cleveland), and pretty much most tax districts follow suit. Their deadlines are also the 17th of April.

What if those two extra days still aren’t enough? Well you can file for an extension.  Individual extensions can be filed that extend the deadline for six months to October 15th. The form used is 4868.  This is an extension to file, not an extension to pay.  So if you think you of may owe, you can send in a payment with the extension to lessen or avoid penalties and interest. Other business entities can be extended as well.  Don’t forget some Ohio cities do not accept federal extensions so consider sending one to them.

So you can cram it all in this weekend and file on the 17th, or file an extension and maybe pay an estimate with it. I can e-file extensions rather easily and may even be able to help you file on time! Happy filing!

With all this driving, what can be deducted?

People who work from home have it good. They have to drive exactly zero miles to get to work and it takes ten seconds to get there.  However, not everyone has it good. Many, many people have to drive to work, and daily traffic patterns say to as much. i.e. traffic jams.  Many people ask me, “Hey, can’t I deduct driving to and from work?” You can deduct a lot of different types of miles in different circumstances. 

Mileage While At Work

No matter what job we have, it seems at times we have to make trips in our car for various business reasons.  A run to the bank.  Meeting with people over lunch. Showing that house.  That mileage will count as business mileage because if you work more than two places in a day, you can count the expense from getting from one to the other.

Commuting

In general, a taxpayer’s daily transportation expenses incurred in going between the taxpayer’s home and a regular work location have long been considered nondeductible personal expenses.   Also known as sitting in traffic during blizzards, construction, and rubber necking motorists.  An important factor is where your work location is.  That is because there are a few exceptions.  Among them are:

Temporary Work Location – If you have at least one regular place of work, then transportation to a temporary work location may work if it is the same trade or business. Temporary generally means less than one year.  What constitutes a regular place of work can be squishy since it varies by circumstance.  Things to look at are is it short term and irregular? Or is it regular and long term?

One example the IRS has given is a doctor who visits several different offices and hospitals regularly by driving from his home to that location.  They said those places are his regular work locations and the commuting is not deductible.  (PLR 9806007) Also think of a construction subcontractor with no regular work location.  In that case the metropolitan area for all practical purposes is his regular work location and the distance from home to first work location in the area is nondeductible commuting.  Tricky isn’t it?
Home Office – In this case if you have a home office as the principle place of business, the miles from there to other work locations in that trade are deductible and wouldn’t be excluded.  Another hurrah for the work from home people! Hurrah!

The IRS has a great chart that illustrates this.  I’ve noticed most people do not deduct miles according to this IRS chart.  It may be wise to do so.

Mileage vs. Actual

With the amount of times this issue keeps coming up you’d think this was a MMA championship match.  Its rigged though.  Mileage almost always wins.  This is mainly because people have a hard time keeping exact records of actual auto expenses. (This would be things like gas, oil, tires, etc.)  Most people keep track of miles.  Or at least they should.  How many of us have had good intentions, even put a notebook in the car, and found it five months later permanently bent into an MC Escher sculpture while trying to find a tissue in the glove compartment? The deduction can be especially valuable if you are self-employed. And if people saw how much money they would save by keeping a proper mileage record, I think everyone would do much better.

The mileage rate is changing all the time.  And sometimes they even split the mileage rate in the middle of the year like they did in 2011.  Nothing like adding confusion to the already confused.  But that’s the way it goes. On top of that it gets even more confusing if you need to switch from mileage to actual expenses.  You are not allowed to go the other way, however.

So it is likely we all have business miles at some point.  The way we deduct it, keep track of it, and when it is deductible can vary like moods of a teenager.  But if all the blocks fall into the right place, we can save a bundle on taxes