News & Tech Tips

Make sure you have proper substantiation for your 2014 donations

mnarog on February 27, 2015

[vc_row][vc_column][vc_column_text]charitable donationsIf you don’t meet IRS substantiation requirements, your charitable deductions could be denied. To comply, generally you must obtain a contemporaneous written acknowledgment from the charity stating the amount of the donation, whether you received any goods or services in consideration for the donation, and the value of any such goods or services.

If you haven’t yet received substantiation for all of your 2014 donations, you may still have time to obtain it: “Contemporaneous” means the earlier of 1) the date you file your tax return, or 2) the extended due date of your return. So as long as you haven’t filed your 2014 return, you can contact the charity and request a written acknowledgement — you’ll just need to wait to file your return until you receive it. (But don’t miss your filing deadline; consider filing for an extension if needed.)

Be aware that certain types of donations are subject to additional substantiation requirements. To learn what requirements apply to your donations, please contact us.

Copyright 2015 Thomson Reuters
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Should you forgo a personal exemption so your child can take the American Opportunity credit?

mnarog on February 25, 2015

StudentIf you have a child in college, you may not qualify for the American Opportunity credit on your 2014 income tax return because your income is too high (modified adjusted gross income phaseout range of $80,000–$90,000; $160,000–$180,000 for joint filers), but your child might. The maximum credit, per student, is $2,500 per year for the first four years of postsecondary education.

There’s one potential downside: If your dependent child claims the credit, you must forgo your dependency exemption for him or her — and the child can’t take the exemption.

But because of the exemption phaseout, you might lose the benefit of your exemption anyway. The 2014 adjusted gross income thresholds for the exemption phaseout are $254,200 (singles), $279,650 (heads of households), $305,050 (married filing jointly) and $152,525 (married filing separately).

If your exemption is fully phased out, there likely is no downside to your child taking the credit. If your exemption isn’t fully phased out, compare the tax savings your child would receive from the credit with the savings you’d receive from the exemption to determine which break will provide the greater overall savings for your family.

We can help you run the numbers and can provide more information about qualifying for the American Opportunity credit.

Copyright 2015 Thomson Reuters
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The “manufacturers’ deduction”: It’s not just for manufacturers

mnarog on February 11, 2015

[vc_row][vc_column][vc_column_text]factoryThe manufacturers’ deduction, also called the “Section 199” or “domestic production activities” deduction, is 9% of the lesser of qualified production activities income or taxable income. The deduction is also limited to 50% of W-2 wages paid by the taxpayer that are allocable to domestic production gross receipts.

Yes, the deduction is available to traditional manufacturers. But businesses engaged in activities such as construction, engineering, architecture, computer software production and agricultural processing also may be eligible.

The deduction isn’t allowed in determining net self-employment earnings and generally can’t reduce net income below zero. But it can be used against the alternative minimum tax.

Your Whalen team will be certain to utilize this powerful deduction when applicable, to reduce your business’s tax liability when preparing your 2014 return.

Copyright 2015 Thomson Reuters
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Tax extenders: 3 credits for businesses on their 2014 returns

mnarog on January 26, 2015

[vc_row][vc_column][vc_column_text]The Tax Increase Prevention Act of 2014 (TIPA) extended through Dec. 31, 2014, a wide variety of tax breaks, including many tax credits — which are particularly valuable because they reduce taxes dollar-for-dollar. Here are three credits that businesses may benefit from when they file their 2014 returns:

  1. The research credit. This credit (also commonly referred to as the “research and development” or “research and experimentation” credit) rewards businesses that increase their investments in research. The credit, generally equal to a portion of qualified research expenses, is complicated to calculate, but the tax savings can be substantial.
  2. The Work Opportunity credit. This credit is available for hiring from certain disadvantaged groups, such as food stamp recipients, ex-felons and veterans who’ve been unemployed for four weeks or more. The maximum credit ranges from $2,400 for most groups to $9,600 for disabled veterans who’ve been unemployed for six months or more.
  3. The Sec. 45L energy-efficient new home credit. An eligible construction contractor can claim a credit for each qualified new energy efficient home that the contractor built and that was acquired by a person from the contractor for use as a residence during 2014. The credit equals either $1,000 or $2,000 per unit depending on the projected level of fuel consumption.

Wondering if you qualify for any of these tax credits? Or what other breaks extended by TIPA could reduce your 2014 tax bill? Contact us!

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Tax extenders: 3 breaks for individuals on their 2014 returns

mnarog on January 26, 2015

[vc_row][vc_column][vc_column_text]On Dec. 19, the president signed into law the Tax Increase Prevention Act of 2014 (TIPA), which extended through Dec. 31, 2014, many valuable tax breaks that had expired at the end of 2013. Here are three that individuals may be able to take advantage of when filing their 2014 returns:

  1. State and local sales tax deduction. Individuals can take an itemized deduction for state and local sales taxes instead of for state and local income taxes. This option can be valuable for taxpayers who live in states with no or low income tax rates or purchase major items, such as a car or boat.
  2. Tuition and related expenses deduction. This above-the-line deduction for qualified higher education expenses may be beneficial to taxpayers who’re ineligible for education-related tax credits, though income-based limits also apply to the deduction.
  3. Home mortgage debt forgiveness exclusion. Discharge of indebtedness income from qualified principal residence debt, up to a $2 million limit ($1 million for married taxpayers filing separately), may be excluded from gross income.

To learn whether you qualify for these — or other breaks extended by TIPA — please contact us.

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