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Summer Activities and Your Taxes

Summer Activities and Your Taxes

It only takes a quick step outside your front door for you to know that summer is in full force here in McAllen and the Greater Rio Grande Valley. The sun is shining brightly and everyone is searching for a way to enjoy the outdoors.

Whether you head to the city pool or are looking at more organized summer activities, we here at Abigail Y. Murray CPA in McAllen, Texas know that you might have to reach into your pockets to pay for those summer programs you and your family can enjoy.

But that doesn’t mean that you can’t save some money! There are plenty of cost-cutting and tax-deductible activities out there for those of us who do our homework.

Summer Fun Doesn’t Have to Cost a Ton

The first activities to start looking into are the ones that will not cost your family anything at all. These opportunities are all around you and ones that you may already be well-acquainted with.

Your local park and recreation department is sure to have a number of activities and events you and your family can enjoy at little to no costs. Your church and other youth groups will also likely offer summer programs, such as vacation Bible school.

A little Google searching will also turn up free arts and craft events as well as day camps occurring throughout your city.

One of the best places to find free activities for your children is at your local library. These are designed not only to keep them learning while away from school but also offer outlets for their imagination and creativity.

A Membership Pays Back in More Ways Than One

Even if what your city library is offering comes with a price or other membership fee, you will probably still be able to qualify for a tax deduction on that cost at the end of the year.

The same is true for memberships at many museums, zoos, and other facilities all over the state and country. Having a membership with these sorts of organizations will not only provide an enjoyable activity for you and your family to enjoy but will also likely be tax deductible.

Your membership has the added bonus of helping support these organizations in your community. The money brought in not only helps to maintain both facilities and staff but also promotes their growth.

The scope of nonprofit organizations is much wider than just animal care centers and museums, though. Your community is sure to have other places you can find something that fits your family’s varied interests.

Memberships count as charitable donations #MurrayCPA #Summer #TaxTip Click To Tweet

Paying For Childcare Can Be Tax-Deductible

Sometimes working parents (and those looking for work) have to enroll their children in summer programs while they are on the clock, as de facto child care.

This usually applies to parents with children 13-years-old and under and these programs can come with added costs. Just having someone to provide child care is not enough to eliminate stress because of the side effect it can have on personal finances.

If that’s the case, there are five important facts for everyone to remember about The Child and Dependent Care Credit, which is aimed at providing financial relief from what you pay for childcare in the summer, as well as the rest of the year:

  1. Overnight camps and other forms of care can’t be used toward this credit.
  2. Day camps will likely be covered.
  3. Where you kids are being taken care of, whether at home or at a facility away from your house, will not count against you if you qualify for this tax credit.
  4. You can be credited up to 35% of expenses that qualify for this credit; the total is determined by your income
  5. Up to $3,000 of expenses for one child and $6,000 for two can be used to determine how much you are credited.
#Summer day camp expenses may qualify for tax credit #IRS #Finances Click To Tweet

There are a number of items to consider when determining if someone qualifies for this tax credit.

For anyone interested in learning more please feel free to contact our McAllen, Texas office today or you can look through Publication 503 from the IRS.

Abigail Y. Murray CPA, LLC is here to answer any questions you might have about how summer activities can affect your taxes.

The last thing anyone wants to worry about is what effect the money going into enjoying the summer months will have on the rest of your year.

Abigail Y. Murray CPA is happy to remind you that there is no cause for concern. There is a good chance that the plans you have for your kids, including camps and other programs, are likely to come with the added benefit of a tax deduction or credit at the end of the year.

Contact us today at 956-800-5600 with any questions you have about your summer finances. Don’t go through the rest of the year without the answers you need.

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Tis’ the Season to Be Prepared

Tis’ the Season to Be Prepared

It’s here once again, citizens of the Rio Grande Valley, and no, we don’t mean the end of football season. While our beloved state sport is going away for a couple of months, there’s something else on the horizon that needs our attention just as much as a Cowboy’s game—tax season.

That’s right. Tax season is here, and with it, confusion, frustration, and perhaps a little bit of worry.

But it doesn’t have to be that way.

Here at the offices of Abigail Y. Murray CPA, we’re absolutely excited about tax season (yes we’re a little different like that). Not only do we get to showcase all of our abilities as professional CPAs, but we also get a chance to talk with and answer all of the questions our clients and friends may have.

We’ve probably heard every type of tax-related question, and that’s why we’ve assembled some of the most common questions people ask, so you can be in the know.

If you don’t find your question below, just give us a call at (956) 800-5600, and we’ll be sure to point you in the right direction.

Now without further ado…

When are my taxes due?

The due dates for taxes this year is April 18th. While taxes are usually due on the 15th, we get an extra three days this year because of the weekend and a federal holiday on the 17th.

If you’ll be filing for an extension this year, you’ll have until Oct. 16th, but be aware—you will still have to pay what you estimate you owe by April 18th.

How can I file an extension?

Sometimes life gets in the way, so if the April 18th deadline doesn’t look like a “can do” for you, then you’ll need to file for an extension. It’s important to recognize that an extension DOES NOT get you out of paying for due taxes by the deadline, but rather gives you extra time to file.

Why should you file for an extension then? For one, an extension will stop a late-filing penalty of 5% of the unpaid tax for each month you’re late (which can accumulate to up to 25%). Then there’s the late-payment penalty of 0.5% for the unpaid taxes for each month. Let’s not forget the interest rate which runs at the federal short-term interest rate plus 3%.

What’s new this tax season?

Not much has changed since the previous tax year; there’s a provision that allows seniors to donate IRA withdrawals to charities without having to declare them as taxable income, and the personal exemption deduction has risen from $4,000 to $4,050.

As previously mentioned, the tax filing deadline has moved to April 18th this year.

Perhaps the biggest news this year is that the IRS said they wouldn’t begin issuing refunds until after Feb. 15th on returns that claim the earned income tax credit or additional child tax credit.

The 2017 tax season will likely see much bigger changes because of a new presidency and governing Republican body in Congress. Check back here frequently to find out new information as the year rolls along.

Do I need to file a return?

It depends on a number of things including your filing status, age, and the type of income you receive. Most full-time workers are going to need to file a return, but things can get a bit tricker for individuals 65 and older.

You can figure out whether or not you need to file by using this online IRS tool.

Even if you aren’t required to file, it still might be worth your time to do so, as you might still be eligible to qualify for a refund (the IRS stated that about 70% of Americans are expected to qualify for refunds this year).

What documents do I need to file my taxes?

Generally, most taxpayers will need their W-2 form, 1099 tax forms, and forms that come from their banks. Other information you might need, depending on how you are filing, will include social security numbers of dependents and receipts from charitable contributions. Don’t forget to round up information on interest paid to school loans.

When can I file my taxes?

The IRS began accepting electronic returns on January 23rd.

You have until 11:59 PM on April 18th to file your taxes electronically, but this isn’t the best idea, as a bad internet connection or faulty computer can lead to issues and penalties.

If you plan on filing your taxes through “snail mail,” you’ll want to send them in much earlier, and have your return and payment postmarked by April 18th. Some post offices stay open late on Tax Day, so give your local office a call to find out if they do.

If you file electronically, you should have the option to pay via online use the IRS’s Electronic Funds Withdrawal function.

Who can I claim as a dependent?

The most obvious choice for many taxpayers is going to be children, but those aren’t the only people that you can claim. In some cases you are able to claim elderly parents, significant others, and some relatives depending on the status of your relationship to them. There are certain standards in place, but if applicable, a dependent can provide you a $3,900 deduction.

Is there anything available for me as a parent?

Kids are a blessing—and not just because you can take advantage of them in your taxes by claiming them as dependents. If you have a child, or children, you can benefit from deductions and credits including:

  • Child and dependent care tax credit—This credit is for parents who have to pay for childcare and it’s worth up to $1,050 per child.
  • Earned income tax credit—This is for low to middle income working Americans and can be as much as $6,044.
  • Child tax credit—This credit can be used for those of us with larger families and can get you up to $1,000 per child under the age of 17.

How long will it take me to get my tax refund back?

This year, most individuals will probably see a longer time frame in getting their refund back. That’s because to combat tax fraud, the IRS is going to be more stringent with filers who have either claimed Earned Income Tax Credit or the Additional Child Tax Credit.

What this means is that no one will see their refunds until late February at the earliest. Additionally, some refunds may face additional review before being sent out. If things go smoothly though, you should be issued a your tax refund in the standard window of 21 days from the time they get your return.

For how long should I keep my records?

The IRS recommends that you keep your tax documents for up to three years. If you have happen to get audited, this is generally how far back they are able to review.

If they suspect tax fraud, underpayment of income tax, or if you’ve written off worthless credits, they can go back up to seven years. Always keep tax documents, receipts for business expenses, forms for charitable donations, and the likes.

Don’t stress this tax season. Call up the professionals at Abigail Y. Murray CPA for the support you need and tax expertise you deserve.

Abigail Y. Murray CPA isn’t just another accounting firm, and you’re not just another customer. Save yourself the headache this year and get an experienced accountant on your side. Our knowledge, experience, and up-to-date techniques means we can make this tax season the best one for you yet—who would’ve thought that was even possible with taxes!

Contact us today at (959) 800-5600 and let’s make this tax season a great one for you.

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What Trump’s Presidency Means for Taxes

What Trump’s Presidency Means for Taxes

What Trump’s Presidency Means for Taxes

The 2016 presidential race is over, and just like with any other transfer of power, there are a lot of uncertainties and questions that remain to be answered. While it’s impossible to fully determine what exactly is going to take place in the next four years, president-elect Donald Trump has discussed certain aspects of legislation that he will seek to push when he comes into power in 2017.

For the everyday American, one of the most important aspects of his policy will be his changes to tax laws. While campaigning, he made some big promises and offered some tax proposals that were a bit radical, including simplifying the federal tax code and protecting the middle-class from the IRS.

We’ll all have to wait until January to see exactly how everything rolls out, but as for right now, we can make a well informed judgment to determine what Trump’s presidency means for taxes.

While change is guaranteed as we move into 2017, one thing that will stay the same is the quality accounting services of Abigail Y. Murray, CPA, LLC.

If you’re a bit unsure about this upcoming year and what it means for your taxes, then consider some the following changes that are set to take place.

The Basics for Individual Tax Rates

For individuals, Trump has proposed a fewer number of individual- and married-filing brackets and lower top rates. The number of categories would change from seven down to three with these new brackets imposing a 12%, 25%, or 33% tax rate depending on one’s income. The tax rates for long-term capital gains would be kept at the current rates, which are 0%, 15%, and 20%.

Trump is also pushing to eliminate head of household filing status, which would affect unmarried individuals who have dependents, such as single parents. He’s also planning on getting rid of the alternative minimum tax on individual taxpayers.

There’s also changes planned for itemized and standard deductions, as well as personal exemptions. Itemized deductions would be capped at $200,000 for married joint-filing couples and $100,000 for unmarried individuals. Standard deductions for joint filers would increase to $30,000, and for unmarried taxpayers, the increase would reach $15,000. Personal and dependent exemption deductions are set to be eliminated.

Consider the following visual to get an idea of where you might stand.

tax

Trump tax plan brackets. (Source: NPR / Tax Policy Center)

Who does this affect?

Like with any changes to the tax law, Trump’s plan is going to affect certain demographic groups differently. Those who look to gain the most benefit from the president-elect’s changes include:

  • The ultra wealthy. The nation’s wealthiest citizens are set to benefit the most from Trump’s proposed tax cuts and may be receiving half of the benefits written into legislation.
  • Certain lower-income Americans. Trump’s tax plan would enlarge the non-taxable bracket with the nonpartisan Tax Policy Center noting that this would increase the number of households who pay no income tax from 44% to 63%. Low-income workers in the non-taxable category would be eligible for the earned income tax credit (EITC) of up to $1,200.
  • Childcare users. The new tax code is set to allow families to deduct childcare expenses. Up to four children or elderly dependents would be allowed for anyone making less than $250,000 ($500,000 if married).

The new Trump plan is aimed at streamlining the tax paying process by removing the system’s bloated exemptions and deductions, and instead encouraging taxpayer to utilize the expanded “standard deduction”.  However, not everyone is going to benefit from these changes. Those who might feel the burden include:

  • Large families. The current $4,050 personal exemption per child is going to be removed and should be offset by the changing standard deduction component. However, this might be a tough transition if the standard deduction doesn’t cover the entire family or if they don’t have expensive childcare deductions.
  • Other low-income, single parent families. Changes to rid the tax code of the personal exemption and the head-of-household filing status means that, “approximately 7.8 million low-income large families will experience increased tax bills under the Trump plan”, according to Forbes.

Unfortunately, changes to the tax system means someone must carry the weight; in this case it’s mostly going to be single parents who will not profit from the alterations.

Business tax changes.

President elect Trump has proposed decreasing corporate tax rates from the current 35% to 15%. The same 15% tax rate would apply to business income from sole proprietorships and business income passed through to individuals from S corporations, LLCs, and partnerships. However, both maneuvers could cause a large decrease in federal tax revenues and will likely meet some obstacles before becoming legislation.

There’s also been talk about eliminating a vast percentage of corporate tax breaks, write-offs, and credits that provide unlimited deductions. But again, nothing will be for certain until Trump gets into the White House and he reckons with corporate lobbyists.

So when will this all take place?

This isn’t an exact science and timetables vary. Democratic opposition to reducing taxes could stall legislation in the Senate. The Republicans, on the other hand, yield enough power to push through changes to the tax law without Democratic support. The first 100 days of the new president will provide vital clues to understanding when these major changes will take place. There is the possibility of seeing them go into effect as early as next year, but we’ll all have to wait and see.

Let the accounting professionals at Abigail Murray, CPA, LLC guide you during this time of uncertainty.

2016 was definitely a rollercoaster, but as things begin to settle, it’s important to plan ahead because as the saying goes, “In this world nothing can be said to be certain, except death and taxes”.

At Abigail Murray, CPA, LLC we make sure to keep up with the latest trends and tax-related news in order to provide you with the most comprehensive services available. So whether it’s preparation for tax season, or helping you out with your long-term financial goals, our accountants can meet your needs.

And with tax season right around the corner, now is the perfect time to seek the professional assistance you need. So contact our office today at (956) 800-5600 to find out how we can help you with the financial support to get you off on the right foot in 2017.

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Fourth Quarter Hero

Fourth Quarter Hero

The fourth quarter in sports is usually when the true champion steps up and takes control of the game. Likewise, dedicating some time and effort into your financial plan during the last three months of the year can truly make bring out the tax-cutting game changer in you.

Abigail Y. Murray, CPA, LLC is your perfect go-to partner during these final moments in the quarter. Our dedicated accounts have the experience and right moves to help you score on this final game winning drive.

With our techniques you won’t have to worry about throwing up a Hail Mary, or sinking in that buzzer beater to get that win. Our strategies will get you ahead of the game and on to financial success.

Fourth Quarter Tax Planning Means Reviewing the Past Year

Fourth quarter tax planning is primarily a review of your inflow and outflows. The first goal is to analyze your federal and state income tax to determine how much you might owe once your return has been filed. Next, you’ll want to determine your withholding so that you can make an educated estimate of how much your payment might be. Last, but not least, you’ll want to use those months prior to April to give yourself an opportunity to save up for that payment.

Analyze your federal and state income tax early to get an idea of how much you’ll owe once you file. #Goals… Click To Tweet

Now, it’s important to remember that both federal and state income tax withholdings can be affected by changes in your personal life including: marital status, the sale of your home, or even a new job. By preparing yourself prior to the “big game” in April, you won’t have to deal with the frustration of an unexpected bill that can put a frown on your game face.

Discuss with your tax advisor what your estimated tax payment is so that you can make sure to meet the safe harbor estimates which will stop you from incurring underpayment penalties. Safe harbor means that if your Adjusted Gross Income (AGI) was over $150K, then 110% of your prior tax year needs to be paid quarterly. If your AGI was less than $150K, then only 100%. Bear in mind that wage withholding is accounted for throughout the entire duration of the year, even if the withholding occurs on year-end bonus.

An additional tip to limit those dubious taxes is to analyze income from capital gains. This income can be subject to both the capital gains tax as well as the 3.8% Medicare surtax. To help avoid this, you might want to think about selling off some investments that have lost value since you originally purchased them. Losses in your net capital can reduce ordinary income by up to $3,000.

Sell investments that have lost value. Losses in net capital reduce ordinary income. #TipstoWin Click To Tweet

Interest and dividend income can also be subjected to the 3.8% Medicare surtax. One means to avoid this situation is by investing in municipal bonds that pay tax-free interest. Also, mutual fund investments in the fourth quarter can bring with it an undesirable taxable dividend before the end of the year (December 31st).

Outflow and CPA Assistance

On the flip side (outflow) think about rolling out your charitable donations early on to help maximize deductions. You can also donate appreciated securities that you have owned for more than one year, which means you get the benefit of a deduction and don’t have to worry about paying tax on the gain.

The truth is, starting good is most effective when you finish well. Having a plan set in motion during the year’s fourth quarter can mean salvation from a lot of headaches. If you’re not too sure exactly where you stand, but would like to get a hold of your situation, then give McAllen CPA, Abigail Y. Murray  a call at 956-800-5600 and let’s her make this fourth quarter a strong one for you.

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Tax Breaks 101: Taxes for New Graduates

Tax Breaks 101: Taxes for New Graduates

College was a perfect experience.  You graduated top of your class, met some lifelong friends along the way, and you managed to avoid the dreaded Freshman 15.  The only issue is that those loan payments are coming due and tax season will be here in a few months.

Well, let Abigail Y. Murray, CPA, LLC provide a little after school tutoring on tax breaks for all the new graduates out there.

  1. A Long Way From Home…

So you graduated and landed your dream job right out the gates.  Or at least a job in an office that gives a window view of your dream job right?  Regardless, those moving expenses can and should be used for tax deductions.  The only stipulation here is that your new job is going to be more than 50 miles away from your old home.  If you meet these standards, then moving costs including packing, shipping, travel, lodging fees, and even mileage can be utilized during tax season.

  1. Those Pesky Student Loans…

A penny saved is a penny earned.  And you can save quite a few pennies, up to $2,500, as long as your parents are no longer claiming you as a dependent.  In fact, even if Mom and Dad are helping to pay back those loans, the IRS simply views it as if you are repaying the debt yourself.  But again, you can no longer be a claimed as a dependent.  Unfortunately however, the opportunity to deduct student loan interest phases out once you start meeting certain income brackets – $75,000 for single filers and $155,000 on joint returns.

  1. Learning is for Life…

Finished up that degree?  Well,  that doesn’t necessarily mean you’re done with learning or even taking some additional courses to improve your skill set.  Another worthwhile tax break for grad-students, or those even taking just one class after graduation, comes in the form of the Lifetime Learning Credit.  This credit can be worth up to $2,000 and applies to additional undergrad, graduate, and professional degree courses.  Better yet, there’s not a limit to the number of years you can claim this credit, and really, you don’t even have to be working towards a specific degree.

  1. Plan Ahead…

The reality is that most new grads may not have the extra cash to participate in retirement funds.  But the sooner you’re able to take advantage of this “free money” the better.  Once you have the opportunity to participate in these retirement plans, usually a 401(k), you’re money will go into a tax free shelter that can’t be taxed by Uncle Sam until you start withdrawing.

Roth accounts can be even more beneficial if your employer provides them.  The contributions to these accounts are not tax-deductible, but do allow for tax-free growth and even tax-free withdrawals.  Ultimately, the choice between the variable retirement plans is dependent upon your financial situation, but these saving accounts do have real-world effects on your taxes.

Remember, thinking long term can put you in a better financial position as you age.

  1. Pick the Right Professional…

So maybe you are a rocket scientist.  That still doesn’t necessarily mean you’re as familiar with the constantly updated tax codes as a certified account would be.  If you really want that peace of mind and security that your taxes are being done correctly, then think about hiring a professional.

Not sure where to look?

Well, Abigail Y. Murray, CPA, LLC is a great start.  We can offer you the most advanced assistance available while ensuring quality services at a sensible price.

So give us a call at (956) 800-5600 and let us be with you every step of the way…from graduation to retirement.

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