We had a great tax season here at The Jones CPA Group, and had the added pleasure of working with many new clients as well as a number of returning clients. For many of these individuals and businesses, getting all of the necessary forms together in time for the filing deadline was a high-stress endeavor. To take some of the strain off, many of them filed for a tax extension, giving them more time to prepare their tax documents.
As we’ve mentioned in previous posts, if you have extended, the deadlines for filing are September 15th for businesses and October 15th for individuals. While these extra 6 months give you some breathing room, it’s important that you not delay your filing any longer than is absolutely necessary. Missing these deadlines can result in high penalties. Here’s what you need to know about payment penalties and how they apply to you if you miss the extension deadline.
Even if you’ve filed a tax extension, you should have made an estimated payment to the IRS if you are expecting to owe any amount this year. If you didn’t do this, when you do file your taxes (even if you file prior to the extension deadline) you will be hit with a late payment penalty. This penalty is generally 0.5% of the amount you owe for each month after the tax deadline. These penalties begin to accrue on April 19th and will continue to add up until you pay the amount due or until the penalty totals 25% of your owed taxes, whichever comes first.
If you filed for an extension and are expecting to owe on your taxes this year, and you didn’t submit a payment, it’s not too late. Our experienced CPAs can help you estimate how much you will owe and get a payment submitted so that you don’t accrue any more penalties. As long as you pay 90% of the amount you end up owing at the time of filing, the IRS may not hit you with any more late payment penalties, so we can help ensure that your estimated payment is as accurate as possible.
Perhaps you have filed for an extension, but are worried that you will be unable to pay the amount you owe when you submit your final tax filing. This is an understandable concern, but we strongly encourage you to file your tax returns in spite of this. In most cases, the penalty for not filing is 10 times higher than the penalty for not paying, so you definitely want to get your return submitted on time.
If you are unable to find any means of paying the taxes you owe (loans, credit card payment, etc.), the IRS is typically willing to set up a payment plan to help you pay off your tax debt in a reasonable amount of time, and in increments that are manageable for you. You can set up a payment plan here if you need to, or one of our accountants can help you do so when filing your taxes.
If you forgot to file for an extension before April 18th, unfortunately, you can’t file for one now. You simply need to file your taxes and submit any necessary payment as soon as possible. Remember that penalties are accrued on a monthly basis. This is 5% per month if the late filing and late payment penalties apply, up to 25% of your total taxes owed. So the sooner you file, the fewer penalties you will have to pay.
Whether you need to file your taxes immediately, or need to prepare for the extension deadline, contact The Jones CPA Group to schedule an appointment. We’ll help you complete your tax return so you can minimize or avoid those late payment penalties.
Many of our clients at The Jones CPA Group are often unclear about what contributions qualify as tax-deductible charitable contributions. You may think that any money or property given to a person or organization can be claimed on your tax return. However, though all of these may be charitable acts in and of themselves, they do not all qualify for tax deduction on your return. Here are some basic guidelines to help you determine whether or not your contributions of money and property can be claimed as a tax-deductible contribution.
When it comes to tax-deductible contributions, there are a few common mistakes that we often see our clients making. Here are the most common types of contributions we see individuals claiming, but which don’t actually qualify for a tax deduction:
These types of donations and payments cannot be claimed for a tax deduction. If you would like further explanation as to why these types of donations don’t qualify, then contact one of our CPAs in Orem.
In order for your donation to qualify, the money or property must be given to a qualified institution, such as the following:
You may also claim any out-of-pocket expenses incurred when serving as a volunteer for a qualified organization. For example, many of our clients volunteer in church organizations, and purchase food or other supplies for these purposes. If not reimbursed by the organization, the individual can claim those purchases as a tax-deductible charitable contribution.
The IRS guidelines for claiming a tax deduction for a contribution are relatively strict. They are created this way in order to prevent abuse of this specific tax deduction, but it does make the tax-filing process more complicated for those who are unfamiliar with these guidelines. If you’re unsure whether or not your charitable contributions qualify for a tax deduction, or if you need professional help in filing your taxes, the contact The Jones CPA Group in Orem.
Many retirees who begin collecting Social Security are caught off guard when it comes time to file their taxes, and they find themselves owing far more than they expected. This is because the rate at which your Social Security income is taxed varies depending on your combined income, since taxes are not automatically taken out of Social Security distributions upfront, they often must be accounted for when you file your taxes in April.
At The Jones CPA Group, we want you to be aware of what the different tax rates are so that you’re not blindsided by the amount you may owe. There are also certain steps you can take to help minimize the amount you’ll owe in taxes, and we’d like to offer some basic advice on how to do so. While the following applies to most people, it doesn’t apply to all. If you are planning to retire in the near future, call or stop by our CPA firm in Orem and we’ll give specific guidance on how to minimize the taxes from Social Security benefits.
For Social Security recipients filing individually, the tax rates are as follows:
“Combined income” refers to your adjusted gross income and nontaxable interest, plus half of your Social Security income.
If you file as a couple, then the following tax rates will be applied to your Social Security income:
“Combined income” refers to the combined adjusted gross income of you and your spouse, plus nontaxable interest, and half of your Social Security income.
Many people on Social Security income find themselves owing a large lump sum when they file their taxes in April, and this can be difficult to pay on a fixed income. Luckily, there are a few ways that you can minimize the amount that you owe on your taxes.
The first way to minimize the amount you owe in April is to request voluntary withholdings from your Social Security benefits. You can do so by either calling Social Security and requesting IRS Form W-4V, or by finding the form online on the IRS website. You can choose what percentage of your benefits you would like to have withheld every month—7%, 10%, 15%, or 25%. Having this amount withheld every month can significantly reduce the amount you owe when filing taxes, making it easier to pay.
Another way to reduce your taxes on Social Security is to first draw down your 401k and IRA balances. This means not signing up for Social Security benefits on the day you retire, but utilizing other retirement accounts as your primary means of income first.
Now that you know the thresholds for different tax brackets, you can monitor your income throughout the year and ensure that it does not rise above your desired bracket. This will take some careful monitoring and planning on your part, but with a little help from our financial professionals, it’s certainly manageable. It also helps to know what other sources of income you have that are taxable; for example, withdrawals from a Roth IRA do not make your benefits taxable, so you could use this account to supplement your income when needed without risking a higher tax rate.
It’s important to note that the tax thresholds listed above only apply to federal taxes on Social Security benefits. Roughly half of the states in the country also tax Social Security income, including Utah. The rate at which you are taxed can vary greatly from state to state, so it’s important to know and plan for those taxes.
For more help on tax filings, financial planning, and more, speak to one of our certified CPAs at The Jones CPA Group in Orem, Utah.
We’ve spent a lot of time lately talking about our tax filing and tax preparation services. Given the time of year, that’s only natural, but we wanted to take a break from all of that to talk a little about the other services we offer—bookkeeping and payroll for businesses. These are vital services for every business owner, and are an essential part of running your business effectively.
Accurate bookkeeping can make the difference between a successful business and a business that ends up closing its doors within the first few years. That’s why we offer professional bookkeeping services for businesses of all sizes. At The Jones CPA Group, our qualified, professional bookkeepers will help you to accurately record your business income and expenses to ensure that you stay under budget and turn a profit.
This is also essential during any audit or when filing your taxes, as it will show compliance with all financial laws and regulations pertaining to your industry. Failure to show detailed, accurate records of business income and expenses can lead to some major complications and fines for your company, so you shouldn’t leave it up to guesswork. Employ an experienced and reliable bookkeeper to do the job for you.
Payroll and bookkeeping go hand in hand for many businesses. Whether you are a large business with many full-time employees or a small business that only employs part-time contractors, it is important that every one of your workers are properly compensated to help you avoid lawsuits and potential government fines.
In conjunction with our bookkeeping services, we can also help to manage your company’s payroll services. This saves you the time, hassle, and frustration of trying to handle all of the payroll and finances on your own, giving you more time to focus on what you do best—running your business. We will ensure that all of your employees receive accurate and timely payments and that all needed forms are filed with no complications.
If you’re looking for an easy solution to managing all of your business’s finances—from bookkeeping to payroll to tax prep—then call our stop by our offices in Orem. Our bookkeepers and CPAs will be able to find you a solution that fits your needs and keeps your business running smoothly.
The Affordable Care Act—or “Obamacare” as it is commonly known—made health insurance mandatory for U.S. citizens. It also required certain employers, known as applicable large employers or ALEs, to offer coverage to its full-time employees. These two new requirements come along with two new forms that you will need to file your taxes. The Jones CPA Group wants you to be informed about these forms so that you can ensure you have everything on hand for filing your taxes.
The 1095-B form is sent out by health insurance companies to every individual who was enrolled in their health care plans during the tax year. This form outlines who in the employee’s family was covered under the plan and the amount of coverage received through the plan. Your health plan must provide a minimum level of coverage for you to avoid paying the tax penalty for being uninsured.
So here’s everything you need to know about receiving this form as an individual, or issuing this form as a business owner.
1095-Bs will begin to be sent out in January of 2016. However, the deadline for issuing these forms is not until March, so you may have to delay your tax return until you receive this form. You cannot file without it, as it acts as evidence that you had the minimum essential coverage, sparing you from having to pay the tax penalty for being uninsured.
The 1095-B will specify how many months of the year each insured member of your family was covered for. If there were gaps in your insurance coverage, you may be required to pay a tax penalty for that uninsured portion of the year. Gaps in coverage that last less than 3 months are exempt from any penalties, and there are a few other exemptions as well. You should speak to your CPA to see if you qualified for any of these exemptions.
When the Affordable Care Act was put into action, it required employers to offer health insurance to all full-time employees and dependents. In conjunction with this, ALE’s were also required to send statements to employees every year that describes their available insurance options. Form 1095-C serves as this statement. Keep reading to learn how this form relates to both individuals and business owners.
You will receive the 1095-C from your employer whether you are insured through your company’s health insurance plan or not. Though it may seem like it is “only” a statement, it is still important that you retain this form for your tax records. It should be sent to you by the end of March.
Whether or not you need to file a 1095-C and send them to your employees will once again depend on whether or not your business is considered an ALE. Only ALEs need to file Form 1095-C. These business will need to send the forms to their employees and to the IRS to show that health insurance was offered to all employees.
The Affordable Care Act can make your taxes a bit more complicated than before, so if you have any questions about these two new forms, tax penalties for being uninsured, or any other tax-related matter, be sure to call or stop by The Jones CPA Group in Orem. We can offer you the advice and tax help that you need.
All of our clients and pretty much every other tax-paying American knows that the personal tax deadline is April 15th. However, there are many other deadlines along the way that will influence your tax return, and it is important that you be aware of these as well. We want all of our clients at The Jones CPA Group to be aware of each deadline throughout the tax season. So mark your calendars; we’ve outlined all of the important deadlines in the article below.
Those who usually owe a lot of taxes come April will make quarterly payments to the IRS to help reduce the bulk sum they’ll owe after filing. These estimated tax payments can only be made through January 15th, so if you have any final payments you wish to make before filing taxes, you should do so soon.
This deadline is important to know for employers, employees, and contractors alike. If you are an employer, you must issue W-2’s to your full-time employees by January 31st. If you use contracted labor of any kind, you will also need to issue 1099’s to your contractors by the same deadline.
As an employee or contractor, be aware that this paperwork must be processed by January 31st; that does not mean you will receive your W-2’s and 1099’s by this deadline, but that they simply must be on their way to you. However, if you have not received the correct paperwork within 2 weeks of this deadline, you should contact your employer.
If you own a business that is either a C-corporation or S-corporation, then you must have your business return filed or request an extension by March 15th. Obviously, this is earlier than the widely-known April 15th deadline, so it is vital that you are aware of this and have your business’s tax documents ready on schedule. This can help you to avoid late fees and interest against your business. If you don’t know what your business’s filing status is (S-corporation, C-corporation, or partnership) then you should find out as soon as possible so you can plan appropriately.
If your business is a partnership, then your deadline for filing taxes is the same as the deadline for filing your personal tax return—April 15th. If you need an extension for either of these types of returns, this is also the deadline for submitting that request. Keep in mind, however, that the longer you wait to file, the busier your CPA and the IRS will be. This means that it can take longer to get your return filed, and longer for the IRS to process your return. Get documents together as quickly as possible and try to file early to avoid the backlog that always occurs close to the deadline.
If you must request an extension, you should be aware that the extension only applies to the filing of your tax return, not to paying any taxes that are due. This means that you will need to send in a tax payment by the appropriate filing deadline for what you expect to owe, as described above. If you don’t make a payment by that date, even if you file for an extension, you will still incur late payment penalties and interest on the amount due, but will avoid any late filing fees as long as you file by the extended due date. Your CPA will be able to tell you the correct amount to pay when you file your extension so that you can avoid such a situation.
Now that you know what to expect in the coming tax season, it’s time to start preparing. Call or stop by The Jones CPA Group in Orem for a tax planning consultation. Then when the above deadlines roll around, you’ll be able to stay ahead of the game and get your return filed early on.
The weeks surrounding the holidays always show a spike in identity theft and stolen financial information. This is often due to the increase in online spending at this time of year; however, shortly after the holidays have passed, identity thieves and scammers often turn to tax-related scams to gain access to Social Security numbers and other vital information.
At The Jones CPA Group, we want all of our clients to know how to protect themselves from tax-related identity theft so that they can be prepared for the coming tax season. Here are some important tips and other information that you can use to protect yourself.
Many instances of identity theft begin with a simple email or telephone scam. It is important that you know how to identify a scam when you see one so that you don’t fall prey to them. Here are a few of the more common scams that identity thieves use to take advantage of unsuspecting individuals:
Sometimes, your personal information can become compromised without you being the victim of an obvious scam, and without you even realizing it. One common tactic thieves use is to file a false tax return with your information early on in the tax season. You may not even realize that your information has been compromised until you try to file a return, and the IRS informs you that your Social Security number has already been used to file a return that year.
Your Social Security number and other personal identifying information can be compromised in a number of ways. To reduce your odds of being a victim to identity theft, follow these tips:
Sometimes, you will take every measure possible to prevent identity theft, and it will still occur. If you fall victim to tax-related identity theft, take the correct steps to stop the activity and minimize the impact on your life. You should immediately respond to any notices from the IRS by calling the number provided. You will also need to fill out an Identity Theft Affidavit from the IRS (Form 14039) and send it in following the instructions provided. Doing so will help to correct the issue as quickly as possible.
If you have more questions about tax-related identity theft, or you want to ensure that your taxes are filed in a safe, secure manner that minimizes your risk, then contact The Jones CPA Group in Orem. Our tax professionals will be able to provide you with the information you’re looking for.
When it comes to planning for retirement, the sooner you start, the better. But many of our clients who are just beginning their retirement planning are unsure of what plans are best for them, much less the details about the different available plans, such as maximum contributions and the tax implications of those contributions. At The Jones CPA Group, we are committed to helping you prepare for your future, so we’d like to provide you with some basic information regarding the different retirement plans available.
A traditional IRA can be set up through your financial institution, life insurance company, mutual fund, or a stockbroker. Like a 401(k), this type of retirement account allows you to make pre-tax (tax-deductible) contributions towards your retirement.
A traditional IRA has a contribution limit of $5,500 or your taxable compensation for the year, whichever is less. If you’re 50 or older, your maximum allowed contribution is $6,500 or your taxable compensation for the year, whichever is less. However, you can only make contributions up to the age of 70 ½. After this point, you are no longer allowed to contribute to a traditional IRA.
Though you can withdraw money from a traditional IRA at any time, any deductible contributions you withdraw are taxable. If you are under the age of 59 ½, you may have to pay an additional 10% tax for early withdrawals, unless you qualify for an exception, which can include situations such as qualified education expenses, first-time homebuyers, or permanent disability. To find out if you qualify for an exception, speak to a financial advisor or CPA.
With a traditional IRA, you are also required to begin taking minimum distributions after you turn 70 ½. The required amount of your distribution is calculated based on your year-end IRA balance, divided by a specified distribution period. Calculators are available online, but to ensure you are taking the correct amount, you should speak to a qualified financial advisor.
A Roth IRA is subject to many of the same rules as a traditional IRA, including maximum contributions. It is important to note that the maximum contribution for traditional and Roth IRAs is the total amount that you are allowed to contribute to all of your IRA accounts. So if you have both types of IRA accounts, you may only contribute a total of $5,500 ($6,500 if over 50) between both accounts.
Despite their many similarities, there are some important differences to note between the two types of IRAs. Perhaps the most notable difference is that Roth IRA contributions are not tax deductible, so they do not offer you an immediate tax break like a traditional IRA does. However, this means that you can make qualified distributions without having to pay tax on the withdrawal. Contact one of our CPAs to learn more about qualified distributions from your Roth IRA.
Another key difference with this type of IRA is that there are no required minimum distributions, and you can continue contributing to your IRA throughout your life, no matter what your age.
A 401(k) plan is usually established through your employer, and it allows you to make elective deferrals from your paycheck directly into your retirement account. Additionally, your employer can make their own contributions to your 401(k), and many companies offer a contribution matching plan for their employees.
Like a traditional IRA, a 401(k) allows you to deduct your elective deferrals from your taxable income, giving you a tax break for every contribution you make. Of course, that also means that any distributions received at retirement, including any earnings the account has garnered, are counted as taxable income at the time of distribution.
Just as IRAs have contribution limits, 401(k)s do as well. The limit on employee elective deferrals is $18,000 for 2015 and 2016; this may be increased in future years to account for cost of living. There is also a limit placed on the total contributions made to your plan, including your elective deferrals and your employer’s contributions; we can help you figure out the limits on your accounts. 401(k)s also permit catch-up contributions; for 2015 and 2016, you can contribute an additional $6,000 into your 401(k) if you are over 50.
You are required to begin receiving distributions from your 401(k) either after you turn 70 ½, or after you retire, whichever is later. However, you are allowed to begin receiving your distributions at the age of 59 1/2, and you may receive your payments either as a lump sum of your full 401(k) balance, or as periodic distributions throughout your life.
Choosing the right retirement plan and maximizing the financial and tax benefits of these plans is a complex matter. It is not something you should attempt to puzzle out on your own. If you need help planning for your retirement or want to learn more about using your retirement accounts for tax-deduction purposes, contact our CPA firm in Orem.
As 2015 draws to a close, it is extremely beneficial for you to begin planning for the tax deadline coming up in April of 2016. With proper planning and preparation, you can often minimize the amount of taxes you owe. One important aspect of your financial portfolio that you should examine at the end of each year is your stocks. Here are some important points to consider regarding your stocks as they pertain to tax planning.
If you need some extra cash for the coming holidays, and you’re considering selling some of your stocks to get it, it’s important that you plan appropriately and try to balance out any gains by selling some of your stocks at a loss. This will prevent you from having to pay unnecessary taxes from the sale of your stocks.
For example, let’s say you purchased 20 shares of Company X and 20 shares of Company Y for $10 per share. Company X’s stock is now worth $20 per share, so you want to sell 10 of your shares to get some extra cash. This will put $200 in your pocket, with a total gain of $100. You will be taxed on this gain. Company Y’s shares are now only worth $5 per share. If you sell all of your stock in Company Y, you will have a loss of $100. This can balance out your gain on Company X’s stock and help you to avoid paying taxes on your gains.
Now, obviously, the taxes on a $100 gain wouldn’t be very significant. But keep in mind that this is merely a simplified example. If you are gaining any significant amount from the sale of your stocks, you can see an increase in taxes on your return next year. This may make it worth selling a stock that is performing poorly in order to minimize the tax amount. You should speak to a certified CPA or financial advisor to determine if this is the best route to take.
Many people give to charities during the holiday season, and you likely know that you receive a tax write-off for these donations. However, many people are unaware that you can actually gift stocks to charities. What are the benefits of doing this? We’ll explain using another example.
As already stated, you have 20 shares in Company X, which you purchased for $10 per share, and which are now worth $20 a share. You plan on making a $400 donation to your church or a charity before the end of the year. If you were to sell all the stock you have in Company X to donate the cash, you would experience a gain of $200 and would be taxed on that gain. So your $400 donation would really only net you a $200 deduction ($400 deduction for the charitable donation, but having to pay tax on your $200 gain).
On the other hand, you could simply gift the stocks to the church or charity. In essence, this is signing over ownership of your stocks to the church or charity in question. The church or charity then immediately gains $400 in stock as a charitable donation from you, and you get to claim a $400 deduction for the donation, even though you only paid $200 originally for the stock. This is beneficial because it allows you to avoid paying tax on the gain of the stock while still maximizing the benefit you receive.
Many people used to sell stocks at a loss near the end of the year, only to turn around and repurchase the same stock. This is called a “wash sale” and it allowed people to report a loss in the sale of the stocks when filing taxes, but still allowed them to maintain ownership of their stocks. While this may sound like an ideal situation to some people, the IRS has caught onto the fact that people were exploiting this loophole.
To combat it, they have put laws in place that prevent you from immediately repurchasing stocks after selling them for a loss. Now, you must wait at least 30 days before you can purchase stock in a company that you have recently sold stocks in if you want to claim the loss on your current tax return.
Proper management of your stocks can be an important part of year-end tax planning. If handled correctly, your stocks can be a means of minimizing the amount of taxes you’ll pay in 2016. However, knowing exactly how to handle the stocks in your portfolio can be complicated when looked at from the perspective of tax planning. We’d be happy to go over your portfolio with you and help you make plans for the coming tax season. Just give us a call or stop by the Jones CPA Group in Orem to set up an appointment.
On The Jones CPA Group website, you’ll find a lot of information about our firm, the staff, and the many tax and financial services that we offer. But if you’re only using this site to learn more about us, you’re really not using it to its full potential. In case you haven’t noticed, we have a lot of tax tools and other financial tools that you can use to estimate your taxes, calculate your mortgage, and even plan for your retirement.
Here’s a brief look at the many tools you’ll find here on our website and how they can help you.
On our Financial Tools page, we offer more interactive calculators than you could possibly need—116 to be exact. These calculators can help you to answer practical life questions like, “Should I live at home, on-campus, or off-campus?”; in-depth financial questions like, “How should I allocate my assets?”; and even fun questions to satisfy your curiosity, such as, “How long will it take me to become a millionaire?”
Each of these calculators will have you enter relevant numbers to help you find out the answers to all of your financial questions, allowing you to plan and prepare for the future. Of course, a financial calculator is not intended to replace the advice of a professional financial advisor. If you really want help planning for your taxes or overall financial future, then schedule an appointment to meet with one of our CPAs or financial professionals.
In addition to interactive calculators that can help you get estimates regarding your tax liability, we offer a number of other important tax tools on our site:
If you have any in-depth questions regarding your taxes, or need help filing your taxes and doing tax preparation for next year, just give us a call. One of our CPAs can meet with you to give you the personalized service you need.
If you’re already one of our clients, then you know about the Jones Pass, but did you know that you can log in right from our website? We have a safe and secure login page on our site so that you can easily log in to our online client portal. There, you can securely upload and download documents to share with us, making it easy for you to get documents to us and vice versa.
These are just a few of the helpful tools that you will find on The Jones CPA Group’s website. Our site, just like our business, is designed to make your life a little easier, and to make taxes and finances seem just a little less intimidating. We hope you’ll find these tools helpful. And of course, if you need a little personal help with your taxes and finances, just stop by our Orem CPA office. We’ll be happy to help you.
As tax time draws ever nearer, it’s time to start thinking ahead. With The Jones CPA Group, you can get professional help actually planning for your taxes, rather than only preparing your return. Here are just a few of the ways that our tax planning and tax projection services can help you.
Have you ever filed your taxes, then been completely shocked by the amount you owed? Some people have even had the experience of owing far more than they expected, and not being able to afford the expected payment. If you don’t want to be caught in this situation, our professional tax projections can help.
Our qualified CPA will look over your finances with you and give you an estimate of what you will owe when you file your taxes. This can help you begin preparing now, so that you’re not caught off guard after filing; and if you will owe a large sum, you can begin saving for it sooner.
In addition to being able to estimate the amount you’ll owe in taxes (or the amount you’ll get in your refund), we can offer you in-depth tax planning advice. We can meet with you and consider ways to potentially reduce your expected taxes through proper investments and financial planning.
For example, if your business has had an especially lucrative year, you may find yourself in a higher tax bracket than you were in last year. This means that it may be a good time to invest in some reasonable business expenses. Let’s say you’ve been putting off purchasing a new piece of equipment that costs $1,000. This year, you’re in a 35% tax bracket, which is higher than you’ve ever been before.
If you were to hang onto that $1,000 instead of purchasing the equipment, you would have to pay $350 in taxes. But if you purchase the equipment, since it is a tax-deductible business expense, you can essentially purchase it for 35% off—spending $1,000 and getting new equipment, as opposed to spending $350 in taxes and getting no equipment.
Proper tax planning is also vital for individual tax returns. Making proper investments near the end of the year may be able to reduce the amount you in taxes, depending on your financial situation. Our CPA can look over your personal finances with you and determine if it would be wise to make additional charitable contributions, or contribute more to a 401(k), HSA, or other tax-deductible savings account.
Though there is no guarantee that you can reduce the amount you owe in taxes, a professional CPA can help you make wise investments for both your personal and business tax returns. Call or stop by The Jones CPA Group in Orem, and set up an appointment for tax projections and tax planning advice from one of our CPAs. We’ll help you get prepared for tax season before this year even ends, so when April 15th rolls around, you have nothing to worry about.
We’ve touched on this topic briefly in an old blog, but we’d like to spend a little bit more time on a subject that many of our clients have questions about—getting deductions for business-related vehicle expenses. If you have a vehicle that you drive for business purposes, you can rack up a lot of miles, which means more oil changes, tire replacements, and other routine maintenance. Rather than simply paying for these types of repairs and maintenance on your own, you can record them as a business expense and receive a deduction when you file your taxes. Here’s what you need to know and do to receive this deduction.
When it comes to business-related vehicle expenses, you have two options for your deduction:
No matter which option you choose, it is important that you keep a detailed record of your expenses and your business-related mileage. So let’s talk a little bit more about how to keep appropriate records for this type of deduction.
Most people choose to take the IRS’s per-mile deduction for their business vehicle expenses, as it usually comes out to a higher total amount. If you want to take this route yourself, then you need to ensure that you keep an accurate, detailed record of every mile you drive for business purposes. Create a chart or spreadsheet that includes the following information:
You should then add up weekly mileage totals, as well as year-to-date totals. This will help you be completely prepared when the time comes to file your taxes. Remember, you can only include mileage acquired for valid business purposes in these logs.
In addition to keeping the mileage log, you will still need to keep copies of all receipts associated with the vehicle used for business purposes.
It’s also important to note that there are a few instances when you will not be permitted to claim the standard mileage rate deduction. To find out if you qualify for this deduction, come by The Jones CPA Group.
If you prefer to claim a deduction for actual car expenses, or you don’t qualify for the standard mileage rate deduction, then you will need to keep detailed records of the actual cost of maintaining your vehicle. You include the following types of expenses:
If the vehicle you are claiming a deduction for is used for both business and personal reasons, then you will only be able to claim a percentage of the vehicle maintenance expenses. For example, if you are a reseller for a company and you drive your car 15,000 miles for business purposes and 5,000 miles for personal reasons in one year, you will only be able to claim 75% of your vehicles maintenance expenses as a deduction. Because of this, a mileage log as explained in the previous section needs to be maintained.
In order to get this type of deduction, you have to keep a detailed record of your expenses, along with receipts for every expense. You can keep a spreadsheet of the expenses for an easy way to total them come tax season, but it is absolutely vital that you keep the receipts as well. If you can’t prove the expenses, then the IRS can choose to not give you the deduction. You can either keep the receipts in a physical file, or store them electronically by scanning or taking pictures of the receipts.
There are strict laws that stipulate the types of vehicles that qualify for this type of deduction and what expenses you can claim. It is best to work with an experienced CPA when claiming these kinds of deductions to ensure that you are filing correctly and getting the maximum possible deduction.
If you qualify for both types of deductions, The Jones CPA Group in Orem can help you figure out which type of deduction will give you the highest return. It may even be worth the time to calculate your deduction using both methods so you can determine which will give you the biggest deduction when you file your taxes. But remember, no matter which way you choose to claim a vehicle deduction, you absolutely must keep detailed, accurate records—either a mileage log or expense receipts—in order to receive the deduction come tax time. For more information, come by our CPA office in Orem.
As you may already know, the IRS offers tax extensions to both individuals and businesses to allow you more time to file your taxes. At The Jones CPA Group, we can file an extension for your personal or business tax return on your behalf. Though this is a great way to get a little breathing room so you can finish gathering your paperwork, it is not something that should be taken lightly; once the extension deadline rolls around, you can be facing serious penalties and fines for filing late.
Here’s what you need to know about tax extensions, deadlines, and the late-filing fees you can face if you don’t file before the extension deadline.
If you need an extension on your personal tax return, you can extend your deadline from April 15th to October 15th. However, even if you are planning to extend, you can still be hit with late payment penalties for not making a tax payment by the tax deadline. To avoid these penalties, you should make an estimate of what you will likely owe and send in that payment amount by April 15th.
It is important that you follow this process to avoid both the failure-to-file and failure-to-pay penalties. The fee for filing late is typically 5% of the unpaid taxes for every month or portion of a month that the tax return is late. The failure-to-pay penalty is normally 0.5% of your owed taxes for each month or part of a month that the amount is unpaid; these fees will accrue until you reach 25% of your unpaid taxes.
If you file more than 60 days after the due date—or your extended due date—the minimum penalty will be 100% of your unpaid tax or $135, whichever is smaller. If you have already extended your tax deadline and want to avoid any late-filing penalties, make sure to get your documents in order and turned in to your CPA as soon as possible.
Businesses such as S-Corporations and LLCs with multiple members can also have their tax deadlines extended. The initial business tax deadline is March 15th for corporations and April 15th for LLCs, but these can be extended to September 15th. If you have gotten an extension for your business’s tax deadline, the extension deadline is only a week away, so you need to get your documents handed over to your CPA right away!
The penalties for filing late as a partnership or S-Corporation can add up quickly. The penalty is $195 per shareholder for every month or portion of a month that you are late. For example, if there are three owners and you don’t get your taxes in until October 2nd, you must pay the penalty for two months—September and October. That comes to $1,170 owed.
Nobody wants to be hit with those kinds of fees. If you want to avoid them, contact us at The Jones CPA Group and send us your documents as soon as possible. As long as we receive all of the information we need, we can get your taxes filed on time so that you can avoid paying any penalties.
At the end of July, the Senate Finance Committee voted on a package of “tax extenders,” which included one provision relating to mortgage debt forgiveness, and how those forgiven debts are taxed. This would extend a law that was initially put in place through the Mortgage Debt Relief Act of 2007. Initially, this law was only in effect until 2010, but was extended through 2014 in 2008 by the Emergency Economic Stabilization Act. Now, the Senate Finance Committee is voting to extend the package through 2016.
At the Jones CPA Group, we believe that it is important for all tax payers to be educated about such changes to tax law. So here’s what you need to know about this vote and how it will affect you.
For the sake of example, let’s say that your home is foreclosed on with you owing a total of $200,000 on your mortgage. The home goes into short sale and sells for only $150,000; the remaining $50,000 is forgiven or cancelled by your lender. Under current law, you would need to report that forgiven debt as income, and you would be required to pay taxes on the forgiven debt.
However, under this tax provision, as much as $2 million dollars in gain from cancelled mortgage debt can be excluded from your taxes and does not need to be reported as income. This can save tax payers thousands of dollars in taxes. This exclusion only applies to your primary residence, and not to rentals or any other properties that may have been foreclosed on.
If you have had your home foreclosed on this year, and part of your debt was forgiven, this extension should be of great interest to you. The Senate Finance Committee voted in favor of this tax provision with a 23-3 vote, and the details of putting the extension into effect are currently being worked out by the Committee. However, this law will likely apply to any homeowner who has had mortgage debt forgiven on their primary residence through the end of 2016.
Keep checking out our blog for updates about this tax law, and other tax-related news. If you would like to learn more about how this will affect your taxes, contact the Jones CPA Group in Orem.
Document retention is an important issue when it comes to taxes. Many people are unsure of how long they should keep their tax returns and any other tax-related documents. And when it is time to get rid of the documents, what should you do with them?
In this article, we’ll tell you a little more about how long you should keep your tax documents, and give you some information regarding the document-shredding services we offer here at the Jones CPA Group.
In most situations, you need to keep your filed tax returns and any documents relating to those returns for a minimum of 3 years. This coincides with the IRS’s statute of limitations, which states that the IRS has 3 years to conduct an audit and assess additional taxes against a tax payer. The 3-year limitation is calculated from the date that the return is filed, or that year’s tax deadline—whichever is later.
After this time period has passed, it is generally safe for you to purge the documents from your files. There are a few instances in which the IRS may assess taxes against you after the 3-year mark; these situations generally only apply to substantial errors in reported income, or deliberately fraudulent tax returns. So, as long as you are filing your taxes consistently and accurately, you may destroy any tax-related documents that are more than 3 years old.
Your tax returns contain sensitive information that needs to be protected at all times, including at the time of document destruction. You should not simply toss the papers into a garbage or recycling bin; even using your personal shredder may not be entirely secure.
At the Jones CPA Group, we offer secure document shredding for all of our clients. This service is entirely free, so you can bring in your old tax returns—or any other documents containing personal information—at any time. We’ll drop the paperwork in a locked receptacle that keeps your documents secure until they’re shredded.
When we are ready for the documents to be destroyed, a paper-shredding company comes to our CPA office, and we monitor them as they shred the documents in the receptacle. All of the shredded paperwork is then removed and disposed of properly. This ensures that all of your information stays secure and protected.
If you have tax returns, tax-related documents, or any other paperwork containing personal information, just bring it to the Jones CPA Group in Orem. We will shred and dispose of the paperwork safely and securely, so you don’t have to worry about anyone getting ahold of your personal information.
“Going green” is a hot topic right now. From individuals to large corporations, it seems like everyone is looking for ways they can protect the environment and cut back on their energy consumption. As you may or may not know, the IRS encourages people to make energy-efficient changes to their homes by providing tax credits for qualifying upgrades. We’d like to tell you a little more about these available tax credits so that you know what you qualify for.
The first type of credit available is for items purchased that produce energy of their own. This includes items such as solar panels, geothermal heat pumps, and wind turbines—items that use a natural resource to produce energy for your home. The credit also applies to fuel cells used to store energy created by these sources.
If you install any of these kinds of items on your private property, you can qualify for a credit of 30% of the cost of installing the energy-producing property. This includes not only the cost of the item itself, but the costs of labor, assembly, installation, and any wiring or piping changes made to your home in order to integrate the new energy source.
It is important that you keep a detailed list of the costs, as well as copies of receipts, in order to qualify for your credit. A CPA will be able to tell you what documents are important and help you file for the credit.
Most homeowners are unlikely to install solar panels or wind turbines on their private property. However, it is quite common for homeowners to make renovations to their home that make it more energy efficient. This includes the following types of upgrades:
These types of energy-efficient upgrades do not qualify for the credit we previously mentioned, because they simply save energy, as opposed to actually producing energy of their own. Instead, they qualify for a credit equal to the sum of 10% of the costs of the improvements.
Overall, you cannot receive more than a total $500 in this credit for all tax years after 2005. There are additional limits to this credit, depending on what types of improvements you are making to your home; you should speak to a CPA to ensure that you are meeting qualifications for this credit, and not exceeding any limitations.
If you’re making energy-efficient improvements in your home, come speak to us at The Jones CPA Group. We will let you know if your improvements qualify for the credit, and how much of a credit you can expect to receive on your next tax return.
For more information on tax credits, give us a call or stop by our Orem CPA office.
You’ve probably heard us use the term “client portal” before. We may have even set you up with one. But we wanted to tell you a little bit more about the file-sharing application that we use at The Jones CPA Group. We call it the “Jones Pass,” and it lets you share your financial documents with us more quickly and securely than ever before.
Ease of Use
The best thing about having a Jones Pass is that it is quick and easy to use. We can help you get set up, and after that, it’s just a matter of you placing documents in your secure online folder. Whether it’s a W2 or a business expense report, we can access your documents instantly so that we can get work done for you with no delays.
Email is one of the easiest communication platforms to make confidential information accessible to those who would steal or misuse it. Email messages simply don’t have the necessary levels of encryption you need to keep your information safe and secure.
With your Jones Pass, your information is encrypted when it is placed into your online folder, and only you and the accounting experts at The Jones CPA Group can access it. You never have to worry about your documents being intercepted, or accidentally sending confidential information to the wrong email address. Your information is secure and protected at all times.
We know you’re on the move a lot, and you may not have time to get to a computer to send us the information we need. That’s why we’ve made sure Jones Pass is fully compatible with your mobile device. No matter where you are, you can add files to your online folder right from your phone or tablet, and we can get instant access to those documents.
Jones Pass is powered by Net Client CS, so if you want to have mobile access to your online folder, all you have to do is download the Net Client CS mobile app, and enter your Jones Pass login credentials. If you don’t have a Jones Pass yet, just give us a call and we can set you up.
Our CPA firm may be in Utah, but with technology like Jones Pass, we service clients across the country and around the world without having to worry about unsecure or inefficient means of sharing files, like email or FedEx. No matter where you are, with Jones Pass, we can still get the job done for you.
If you have questions about Jones Pass, give us a call or stop by The Jones CPA Group in Orem. We can get you set up so you can start securely sharing your documents with us right away.
You may have heard the term “S corporation” mentioned in reference to your small business. In case you don’t know what that term means, the IRS defines S corporations as “corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.” In layman’s terms, an S corporation is a designation given to a business that alters the way the business and its owners are taxed.
At The Jones CPA Group, we deal with many business owners who are unsure of how to file taxes for their businesses. For most of our clients who own small businesses, we strongly recommend filing to become an S corporation. Doing so can offer you exceptional savings in your taxes.
Many small-business owners operate their businesses as single-member LLCs or partnerships. They are taxed at their standard income tax rate, but on top of that, they must pay a self-employment tax; for 2015, the self-employment tax rate is an additional 15.3%.
Owners of small business with an S corporation designation, on the other hand, are only taxed at their standard income tax rate, waiving the self-employment tax completely. With the self-employment tax continuing to rise, you can imagine how much filing for this designation can save you.
If you receive an S corporation designation for your business, you will be required to pay yourself an “officer’s wage” in order to be compliant with IRS requirements. You must select a reasonable salary for yourself at the beginning of each year, and issue yourself a paycheck as you would for any other employee; you will also issue yourself a W-2 each tax year. The officer’s wage will then be listed as an expense for the business.
It is important that you continue paying yourself an officer’s wage each year in order to remain in compliance with IRS regulations. If you fail to do so and are audited, you can face penalties and fines from the IRS. If you’re unsure of how to pay yourself an officer’s wage, The Jones CPA Group offers payroll services and we are more than willing to help.
Filing as an S corporation is beneficial for the vast majority of small businesses; however, there are many small-business owners that should file under a different designation. If you are interested in your business becoming an S corporation or are unsure whether or not filing as an S corporation is right for you, contact the Jones CPA Group. Our tax professionals will work with you to determine if filing as an S corporation is the best choice for your business.
Home offices are often a point of confusion for our clients when tax time rolls around. Figuring out whether or not you qualify for a home office deduction is more complicated than you might think, not to mention actually calculating the deduction. Here are the basic qualifications you have to meet to be eligible for a home office deduction. We’ll also tell you a little more about how your deduction is calculated.
To qualify for a home office deduction, you must use a portion of your home exclusively and regularly for business purposes. This means that part of your home—typically a room in your home or a separate structure on your property—must be dedicated strictly to your work. This is a requirement that many people overlook, or believe to be “flexible,” but this is not the case.
As an example, let’s say that you have a small room in your home with a desk and a computer that you use for business purposes. If the entire room is used solely for your work, you can claim the room for a home office deduction. However, if your children also use the room for homework or play games on the computer, you no longer qualify for the home office deduction.
If you are audited, and the auditor can prove that the room was used for a purpose other than business, you will have to pay back the deduction with interest and penalties. This is why it is vital that you ensure your home office is never used for anything other than business.
If you qualify, there are 2 ways that you can calculate your home office deduction. The first is a “simplified” method. All you have to do is multiply a set dollar amount (chosen by the IRS) by the square footage you use for your business.
The other method is more complex, but can often yield a higher deduction. For the standard method, you will need to calculate the percentage of your home that is used for your business. You will then be able to deduct that percentage of the following types of home expenses:
Additionally, you can deduct expenses that are solely related to the running of your business, such as the following:
There is a lot that goes into calculating a home office deduction, so we don’t recommend doing it on your own.
Many people incorrectly claim a home office deduction, so the IRS keeps a close eye on these deductions. Here at The Jones CPA Group, we want to make sure that all of our clients claim these deductions correctly. We will ensure that you qualify for the home office deduction and calculate the amount of the deduction accurately so you don’t have anything to worry about.
Call to schedule an appointment or stop by our office today.
At The Jones CPA Group, we believe in offering our customers service that is both personalized and personable. That means getting to know each of our customers on an individual basis, and letting them get to know us as well. With that in mind, we’d like to introduce you to the faces behind The Jones CPA Group.
Clyde is the founder and owner of The Jones CPA Group. He is a licensed CPA with nearly 20 years of experience in public accounting, and specializes in preparing income taxes for both businesses and individuals. In addition to tax prep, he has experience in developing tax strategies, structuring businesses, and other accounting and payroll services.
Before starting The Jones CPA Group, Clyde worked at Larson & Company, CPAs in Spanish Fork, where he was a partner for 10 years. Prior to this, he worked at Peterson & Associates, CPAs in Spanish Fork, which is where he initially began his public accounting career.
Clyde received his education at Utah State University, where he received both his Bachelor and Masters of Accounting. He has also been trained in preparing business valuations through the National Association of Certified Valuation Analysts.
Outside of his work and education, Clyde has been a proud member of the Rotary Club for 15 years, where he has been able to participate in many community projects. He is married to Jennifer, and they reside in Mapleton with their 5 children. Clyde also enjoys softball, and has a passion for motorcycles and golf.
Jen is our office manager, and she is the friendly face that you will see when you first walk through the doors of The Jones CPA Group. She keeps things running smoothly throughout the office, and has over 10 years of experience as an office manager.
Jen graduated from Utah Valley Community College (now Utah Valley University).
She is married to Clyde, and spends most of her days working with him and spending time at home with her children. When she has free time, she enjoys reading or going to the movies.
Phillip is The Jones CPA Group’s resident tax professional, and he primarily focuses on preparing taxes for both individuals and businesses. He worked at Larson & Company, CPAs with Clyde before joining him at his new firm.
Phillip also attended Utah State University, where he received Bachelor’s degrees in both Accounting and Economics. He is currently working on his Masters of Accounting through Western Governors University.
Phillip married his wife, Erin, in October 2014. They make their home in Spanish Fork. He enjoys playing Ultimate Frisbee, and has recently taken up golfing in his spare time.
Michelle also worked with Clyde before joining him at The Jones CPA Group. She has 2 years of experience doing bookkeeping, payroll, and other accounting services, and specializes in these services for our firm.
She has 4 children and 3 stepchildren with her husband, John. She is an avid crafter, and enjoys interior designing and cooking for her family. When she has the time, she loves to travel and see new places.
Carrie is the Accounting Services Manager at The Jones CPA Group. She has been providing accounting services to a variety of businesses for over 13 years. Prior to joining our firm, Carrie owned her own businesses providing payroll and bookkeeping services to other companies.
Carrie received a Bachelor’s degree in Accounting from Utah State University in 1998, and she is also a certified ProAdvisor for Quickbooks.
She has been married to her husband for almost 18 years, and they have 4 children—2 boys and 2 girls—between the ages of 16 and 8. They have also recently added a new member to their family—a puppy named Leo.
Carrie’s family loves the outdoors. They enjoy spending time together in the mountains, camping and hiking as a family.
Bryce is a Senior Accountant at our firm. He has been an accountant since 2003; 5 of those years were spent working in public accounting, with the remaining years working in industry. This has given him broad exposure to accounting rules, and tax laws and regulations.
He received his Bachelor’s degree in Accounting from Utah Valley University, and his Masters of Accounting from Utah State University. At both schools, he graduated Cum Laude.
He married his sweetheart, Cami, in 1995 and they have 3 children—Danica, Devin, and Naomi. There’s nothing Bryce loves more than just spending time with his family. He is a very active individual, and enjoys running and, more recently, road biking. He has completed several half marathons as well.
We’re proud of each member of our team and the skills that they bring to our firm. We invite you to get to know us a little better by giving us a call or stopping by our offices. We look forward to speaking to you!
The IRS recently released their list of the “Dirty Dozen” tax scams for 2015; this list describes 12 different schemes that criminals have used this year to steal identities and commit tax fraud. We’d like to discuss 5 of the most commonly seen tax scams, and tell you how you can avoid becoming a victim of one of these scams:
Phone Scams: At the start of this year’s tax season, people across the nation began to receive threatening phone calls from scam artists claiming to be IRS agents. These aggressive calls threatened people with revocation of licenses, deportation, and even arrest, attempting to use these scare tactics to steal important personal and financial information. There has been a large surge of these kinds of phone calls in recent months, so be on your guard if you receive a phone call of this kind, and don’t give the caller any of your personal or banking information.
Phishing: You should always be wary of unfamiliar or unexpected emails, even if they seem to come from a credible source like the IRS. The IRS will never send you an unexpected email about a refund or an overdue tax bill. If you receive something like this, and you aren’t expecting it, it is likely a phishing scheme, and you should not click on any of the links contained in the email. Delete the email immediately.
Identity Theft: Tax season is a common time for identity theft, because you are putting down a lot of important personal information—like your Social Security number and income—in writing, whether it’s on a physical document or on your computer. Though the IRS has made progress in pursuing these criminals, it is important that you make efforts to protect your personal information, especially during tax season. Keep your W2s and other important documents in a secure location, and only give your personal information to people and businesses that you can trust.
Fake Charities: Some scam artists will masquerade as a charity to garner donations from unsuspecting victims. Make sure you do your research before giving a donation to a charity you’re not familiar with, so you can ensure that your hard-earned money is going to a legitimate cause. You should also be on the lookout for fake charities that have similar names to other charitable institutions. You can check the statuses of various charities through IRS.gov.
Fraudulent Tax Preparers: Every year, a few dishonest individuals set up shop for tax season, pretending to be a credible tax preparer. They then use your personal information to commit tax fraud, identity theft, and other scams. You should be wary of any tax preparer who guarantees you a refund as well. Make sure you only work with a certified, trustworthy tax preparer who has security measures in place to protect your identity. At the Jones CPA Group, we utilize secure document sharing so that you can safely share your information with us online, and all physical documents in our office are kept secure and confidential.
We want all of our clients to be informed so you can avoid becoming a victim of these kinds of tax scams. Guard your personal information carefully, do your research, and work with a trustworthy tax preparer to ensure that your information remains safe and secure.
Contact us for safe and secure tax preparation. You can find the full list of the “Dirty Dozen” tax scams here.
Most people are familiar with the Affordable Care Act, or “Obamacare” as it is commonly called, but few people know how it affects them individually. In fact, many of our clients are surprised at the end of the year when they learn the amount they’re being penalized for not having health insurance. We want to provide you with some basic information about the Affordable Care Act and its associated penalties so that you know how it will affect you.
The Affordable Care Act requires US citizens to purchase health insurance. If you can afford insurance but elect to not buy it, you need to have a health coverage exemption, or you will face a fine at the end of the year. This penalty is calculated based on either your annual income or on a flat, per-person fee for your household.
In 2014, those without coverage had to either pay 1% of their yearly household income or $95 per person for the year, whichever was higher. For 2015, this fine will be increased, and those without coverage will have to pay the higher of these two amounts:
Obviously, the penalty for 2015 will be much higher than it was for 2014, and the fines are expected to continue increasing every year. For 2016, the penalties are already projected to be 2.5% of the household’s annual income or $695 per person.
These fines are paid when you file your annual tax return.
If you lose your job and are without benefits for a short amount of time, you can still avoid paying the penalties. The Affordable Care Act offers a short-term coverage gap exclusion for those who are without coverage for 3 months or fewer throughout the course of the year. This allows you the time to search for employment and health coverage, or to purchase government-sponsored health insurance to cover the gap until you can find new employment and benefits.
It is also important to note that the penalties are prorated based on the number of months you are without coverage. So, if you have not had health insurance so far in 2015, you can still find coverage and face a lower penalty at the end of the year.
If you are still unsure of how the Affordable Care Act will affect you, or you need help planning for the healthcare penalty on your taxes, give us a call or stop by our office.
Many of our clients use QuickBooks and other expense-tracking software for tracking their business expenses. While this kind of software is a useful tool for business owners, it is only truly effective when combined with a detailed and accurate paper trail of those expenses. If you’re not sure what kind of paper trail you should be keeping for your business expenses, here are some basic tips to get you started.
A lot of business owners think that their bank statements are enough of a paper trail to prove their business expenses; however, the IRS is starting to push more and more for actual receipts of business purchases. For this reason, we have begun encouraging our clients who own small businesses to keep copies of receipts for all their business expenses.
Obviously, keeping a filing cabinet full of physical receipts can be troublesome, and can even lead to receipts getting lost. Instead of keeping the physical receipt, you can scan the receipt into your computer, or even take a picture of it with your phone. Save the image to a folder on your Google drive, DropBox, or other online storage drive. You will then have a complete, accurate paper trail for your business expenses without having to deal with the actual papers themselves.
If you own a vehicle that you use for business purposes, you can use your vehicle expenses or the number of miles you drove for business purposes as an expense. Most of our clients usually elect to deduct the actual mileage, as opposed to vehicle expenses, because the total deduction will typically come out higher; for 2015, the rate is $0.575 per mile.
However, if you choose to deduct your actual mileage for your business expenses, you can’t just make an estimate of the miles you accrued for business purposes. The IRS wants to see a detailed mileage log that outlines the date the miles were accrued, the destination, the reason for the travel, the odometer readings before and after the trip, and the total miles for each trip. An example of a mileage log provided by the IRS can be found here: http://www.irs.gov/pub/irs-pdf/p463.pdf#page=27
You can create your mileage log in a Google spreadsheet or in Excel. Entering both your actual mileage and vehicle expenses can help you determine which type of deduction you’ll want to use on your taxes next year.
The records that you need to keep and the deductions that you qualify for depend heavily on your business and your individual situation. For personal tax planning and bookkeeping advice, call or stop by our offices.