Author: Dillon Wright

Domain: www.wrightaccountingblog.com Purpose: The purpose of my blog is to share accounting, finance, marketing, and tax knowledge with professionals and business owners of the Millennial Generation (mid-1980s – early 2000s) and Generation X (early 1960s – early 1980s).

Background: During eight years on the staff of two CPA firms, I received thorough training that included continuing professional education (CPE) seminars, formal & informal mentoring programs, on-the-job exposure to client organizations, and independent reading, research, and study.  Upon terminating my employment in June 2014, I started the CPA practice of Wright Accounting & Consulting, L.L.C.

Objective: My goal for the “Young Professionals & Entrepreneurs Blog” is to combine the knowledge gained from these experiences, and share it with my peers in order to educate and build mutually beneficial relationships

About the Author

Recent Posts::

Oil & Gas Lease TaxationAugust 18, 2015

Rental Real Estate: Property ManagementAugust 25, 2015

Slideshow: 2015 Year-End Tax PlanningOctober 20, 2015

Business Formation: Limited Liability Company (LLC)June 10, 2015

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TIPS FOR MINIMIZING TAX PREPARATION COSTS

Inefficiencies in Tax Preparation Process. Inefficiencies can result from the actions/inactions of numerous parties and for a variety of reasons. Avoid delays that frequently arise by following these guidelines: Providing Complete Information, Organizing Tax Documents Adequately, and Communicating Promptly to Follow-Up Inquiries.

Primary Drivers of Tax Preparation Costs

I. Complexity of Client Activities, andII. Inefficiencies in Tax Preparation Process

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Complexity of Client Activities. While minimizing complexities of your tax situation is often beyond control, I offer the following suggestions for reducing difficulties: Identify options for structuring a new business prior to commencement, Communicate changes in facts & circumstances that result from lifetime

events (i.e., marriage, child birth, death of loved one, divorce, etc.), and Understand and avoid common pitfalls related to unexpected changes.

BUSINESS EXPENSESSummary List - 2012 Tax Return

Advertising 256 Meals 1,524 Office Supplies 1,256 Salaries & Wages 8,451 Taxes & Licenses 269 Total - Business Expenses 11,756

6 Tips for Minimizing Tax Preparation Costs. You can assist your accountant in expediting the preparation of your annual returns with these six (6) tips:1. Completeness. Review prior year tax returns to identify all sources of income and

deductions.2. Completeness. Compare current year tax documents to income/deductions on

prior year returns, and prepare explanations for new or omitted items.3. Organization. Utilize a “Client Organizer” to compile the appropriate information

in a manner familiar to your tax preparer. Below is a link to this document: http://www.wrightaccountingcpa.com/?page_id=3586

4. Organization. Summarize income and expenses that are not reported on standardized forms (i.e., Schedule C expenses, charitable contributions, etc.)

5. Communication. Issue prompt responses to follow-up inquiries from your tax preparer (long delays can negatively affect the “rhythm” of the process).

6. Communication. Call attention to new/omitted items, potential discrepancies, or any other item(s) you believe warrant special attention.

Organized Tax Information Vs. The Dreaded “Shoebox Receipts” (Unorganized)Review Prior Year Returns

Lifetime Events – Tax PlanningBusiness Formation: LLCs

Quarterly Estimated Tax. Self-employed individuals and business owners are generally required to remit taxes to tax agencies. This is primarily accomplished through quarterly estimated tax payments. As a general rule, you must pay estimated tax if both of the following apply: You expect to owe at least $1,000 in tax for the year, and You expect your withholdings and refundable credits to be less than

the smaller of: 90% of the tax to be shown on your tax return, or 100% of the tax shown on your prior year’s tax return

For estimated tax purposes, the year is divided into four (4) payment periods. In general, the due date for each quarterly installment of estimated tax is as follows:

Car & Truck Expenses. If you use your car or truck for business purposes, you ordinarily can deduct expenses related to its business usage. There are two (2) methods available to choose from in figuring your deductible expenses, as follows:o Standard Mileage Rate, ando Actual Car/Truck Expenses

Business Use of Your Home (Home Office). The costs associated with maintaining a home office may qualify as a tax deduction. To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business, Exclusively and regularly as a place where you meet or deal with customers in the normal course of

business, In the case of a separate structure which is not attached to your home, in connection with your trade

or business, or On a regular basis for certain storage use

Quarterly Installment Dates of Quarter Due Date 1st Quarter Jan. 1 – March 31 April 15th

2nd Quarter April 1 – May 31 June 15th

3rd Quarter June 1 – Aug. 31 September 15th

4th Quarter Sept. 1 – Dec. 31 January 15th

Over the last several years, I have received a number of inquiries related to the income tax requirements and responsibilities of self-employed individuals and business owners. Several topics almost universally crop up during these discussions, as follows: Quarterly Estimated Tax, Car & Truck Expenses, and Business Use of Your Home (Home Office)

Common tax topics for self-employed individuals & business owners

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Actual Car/Truck Expenses Gasoline Oil/Oil Changes Licenses Parking Fees Tolls Tires Registration Fees Depreciation Insurance Repairs/Maintenance

Standard Mileage Rate2014 2015

$ 0.56 $ 0.57

QUESTIONNAIRE: INDIVIDUAL INCOME TAX RETURNSwww.wrightaccountingcpa.com

PERSONAL INFORMATION Yes No Did your marital status change during 2015?     Are you legally married?     If Yes, do you and your spouse want to file separate returns?     If Yes, will you file a joint federal return and be required to file single state returns?     Did you address change during 2015?? If yes, please provide details.     Can you or your spouse be claimed as a dependent by another taxpayer?    

DEPENDENTS     Were there any changes in dependents from the prior year?     Did you pay for child care while you worked or looked for work?     Do you have any children under age 18 with unearned income more than $1,000?     Do you have any children age 18 or student children, aged 19 to 23, who did not provide

   

half of their cost of support and that have unearned income of more than $1,000?     Did you adopt a child or begin adoption proceedings during 2015?         PURCHASES, SALES & DEBT     Did you have any debts canceled, forgiven or refinanced during 2015?     Did you start a new business, purchase a new rental property, farm or acquire any new

   

interest in any partnership or S-Corporation during 2015?     Did you sell an existing business, rental property, farm or any existing interest in a     partnership or S-Corporation during 2015?     Did you sell, exchange or purchase any real estate in 2015? If so, please attach the     closing statements.     Did you pay any student loan interest in 2015?     Did you take out a home equity loan in 2015?    

SALE OF YOUR HOME (Principal Residence) Yes No Did you sell your home (i.e., principal residence) in 2015?     If Yes, did you receive Form 1099?     If Yes, did you own and occupy the home as your principal residence for at     least two (2) of the five (5) year period prior to the sale?     Did you ever rent out this property?     Did you ever use any portion of the home for business purposes?     Have you or your spouse sold a principal residence within the last two (2) years?

   

At the time of the sale, the residence was owned by: _Taxpayer _Spouse _Both

   

     ITEMIZED DEDUCTIONS     Did you contribute property (other than cash) with a fair market value greater     than $5,000 to a charitable organization?     Did you incur any casualty or theft losses during the year?     Did you make any large purchases, such as motor vehicles and boats?     Did you incur any casualty or loss attributable to a federally declared disaster?

   

     SEVERANCE/RETIREMENT     Did you retire or change jobs in 2015?     Did you receive deferred, retirement or severance compensation?     If Yes, enter the date received (Mo/Da/Yr). ________ (Date)     Did you or your spouse turn age 70 ½ during the year and have money in an IRA

   

or other retirement account while not taking any distribution?    

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I recommend completing this questionnaire prior to submitting information to your tax preparer. Doing so can increase the likelihood of efficiently assembling the data necessary to prepare a complete return, which can improve effectiveness in tax preparation at a lower fee cost.

QUESTIONNAIRE: INDIVIDUAL INCOME TAX RETURNS

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Miscellaneous Yes No Did you or your spouse have any transactions pertaining to a medical savings

   

account (MSA) during 2015? If you received Form 1099-SA, please provide.

   

Did you or your spouse have any transactions pertaining to a health savings

   

account (HSA) during 2015? If you received Form 1099-SA, please provide.

   

Did you or your spouse contribute to a Roth IRA or convert an existing IRA     into a Roth IRA?     Did you or your spouse roll into a Roth IRA any distributions from a retirement

   

plan, an annuity plan, tax shelter annuity or deferred compensation plan?     Did you withdrawal any amounts from your IRA to pay for higher education     expenses incurred by you, your spouse, your children or grandchildren?     Did you withdraw amounts from a Coverdell Education Savings Account or     Qualified Education Program (Section 529 plan)? If Yes, provide 1099-Q.     Did you or your dependents incur any post-secondary education expenses,     such as tuition?     If you or your spouse are self-employed, are you or your spouse eligible to be

   

covered under an employer’s health plan at another job? If Yes, how many

   

months were you covered? _____ (No. of Months)     Did you move to a different home because of a change in your job location?

   

Did you pay in excess of $1,000 in any quarter, or $1,800 during the year for

   

domestic services performed in or around your home to individuals who     could be considered household employees?     Did you purchase a new alternative technology vehicle, including a qualified

   

plug-in electric drive motor vehicle in 2015?     Did the IRS or another tax agency notify you of changes in prior year returns?

   

Miscellaneous (continued) Yes No Did you lose your job during 2015 because of foreign competition and     pay for your own health insurance?     Did you install any alternative energy equipment in your residence such

   

as solar water heaters, solar electricity equipment or fuel cells?     Did you install any energy efficiency improvements, or energy property

   

in your residence such as exterior doors or windows, insulation, heat     pumps, furnaces, central air conditioners or water pumps?     Have you been an identity theft victim and have you contacted the IRS?

   

If Yes, furnish the 6-digit identity protection PIN issued by the IRS. ___     Did you have any work outside of the U.S. or pay any foreign taxes?     Did you or your spouse serve in the military or were you or your spouse

   

on active duty?     Did you or your spouse claim a homebuyer credit for a home     purchased in 2008?     Did you have healthcare coverage (health insurance) for yourself, your

   

spouse, and any dependents during 2015?    

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REDUCE YOUR TAX BURDEN BY DEDUCTING TAXES PAID

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Three (3) Categories of Deductible Taxes:1. Real Estate Taxes,2. State/Local Income Tax OR Sales

Tax, and3. Personal Property Taxes

STANDARD DEDUCTIONFILING STATUS AMOUNT

Single $ 6,300 Married Filing Jointly $ 12,600 Head of Household $ 9,250

ITEMIZED DEDUCTIONS

i. Medical & Dental Expenses,

ii. TAXES YOU PAID,iii. Interest You Paid,iv. Gifts to Charity,v. Casualty & Theft Losses,

andvi. Job Expenses & Certain

Misc. Deductions

When filing individual income tax returns, you have the option to itemize deductions or take the standard deduction, as follows:

The “Taxes You Paid” are subdivided into three (3) types of deductible taxes, as listed below:

Real Estate Taxes – Taxes you paid on real estate (i.e., your home & other land/buildings) not used for business can be deducted in the year paid.

Personal Property Taxes – A deduction is allowed for state and local taxes on personal property (i.e., your automobile & other tangible property other than real estate) if the tax was based on value alone.

State/Local Income Tax OR Sales Tax – Income taxes paid to state and local municipalities represent are deductible on Schedule A. You have the option of deducting state and local sales taxes in lieu of income taxes, should this provide a greater deduction.

Deducting interest paidwww.wrightaccountingcpa.comwww.wrightaccountingblog.com

Mortgage Interest

Home Equity Interest

Investment Interest

If you have borrowed money to buy, build or improve your home, you can deduct some or all of the interest you paid in 2015.

In addition to home acquisition debt, interest paid on home equity debt may also be deductible. Interest paid on loans secured by your home, but not necessarily used for any specific purpose, is deductible on balances up to $100,000 ($50,000 for married taxpayers filing separately).

If you borrow money to make investments, the interest paid on the loan may be deductible. On Schedule A, investment interest is deductible up to the amount of taxable investment income you report.

Among the itemized deductions on Schedule A of IRS Form 1040, you will find “Interest You Paid.”

You may be able to deduct interest on debt arising from your mortgage, home equity line-of-credit (heloc), and investment activity.

Want to learn more?

View the complete article athttp://www.wrightaccountingblog.com/2016/02/deducting-interest-paid

A “home” can be a house or an apartment – even a trailer or a boat, as long as it has cooking, sleeping and toilet facilities. You can deduct the interest on two such homes.

Examples of Investments Financed w/ Debt:Margin Accounts w/ Brokerage FirmTract of Land You Intend to Sell at a

Profit