As part of the 2012 American Taxpayer Relief Act (ATRA), tax rates, both ordinary and capital gains, increased in 2013 for higher income taxpayers whose taxable income exceeds the income threshold for their filing status.
- Convert Unused Property Into a Tax Deduction
- When you give away items like clothing, appliances, vehicles, and other goods to a qualified charity, your generosity can add up to a tax write-off if you itemize your deductions. The amount of your deduction is generally the donated property's “fair market value.” The IRS definition of fair market value (FMV) is “the price a willing buyer would pay and a willing seller would accept for an item, when neither party is compelled to buy or sell and both parties have reasonable knowledge of the relevant facts.”
- Did You Overlook Something on a Prior Tax Return?
- Occasionally, clients will realize that an item of income was overlooked, a deduction was not claimed, or that an amended tax document was received after the tax return was already filed. Regardless of whether the oversight will result in more tax due or a refund, it should not be dismissed. Failing to report an item of income will most certainly generate an IRS inquiry, which typically happens a year after the original return was filed and after the interest and penalties have built up. On the other hand, if you have a refund coming, you certainly don’t want that to go by the wayside.
- Are You Collecting the Needed W-9s?
- If you use independent contractors to perform services for your business or rental that is a trade or business, and you pay them $600 or more for the year, you are required to issue them a Form 1099 after the end of the year to avoid facing the loss of the deduction for their labor and expenses. (This requirement generally does not apply for payments made to a corporation. However, the exception does not apply to payments made for attorney fees and for certain payments for medical or health care services.)
- Miss the April 15 Deadline?
- Did you miss filing your 1040 tax return by the April 15 due date? If you did, you may be accruing late filing penalties, late payment penalties, and interest. Late filers can mitigate those penalties by filing as soon as possible. There are no late filing penalties or late payment penalties if you had no tax liability (i.e., did not owe or would have gotten a refund) on April 15.