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‘Tis The Season of Tax Saving Tips: 14 End-of-Year Tips That Are Sure To Bring You Joy

‘Tis The Season of Tax Saving Tips: 14 End-of-Year Tips That Are Sure To Bring You Joy

As of the time of this writing, the Republican tax plan has not been signed into law. The proposal has plenty of interesting provisions, to say the least, but most importantly to taxpayers, this legislation would NOT come into effect until next year (Jan. 1, 2018).

This means (A) there will be no impact on your 2017 tax filings which are due on April 15, 2018, and (B) there are a number of end-of-year tax tips that are still effective under the current tax laws. Your McAllen CPA at Abigail Y. Murray, CPA, LLC. wants to add a little joy to your holiday season by sharing with you 14 tax saving tips for both individuals and small business owners.

Personal Tips

1. Defer income until 2018. If you have the opportunity to defer income, you may want to consider doing so, especially if you think you might fall into a lower tax bracket in the 2018 tax season. A few options might include delaying an end-of-year bonus. This is a good strategy to move some taxable income into the following year.

#AYMCPA #TaxTip: Defer income until #2018 to lower taxable income. Click To Tweet

2. Increase payments to increase deductions. If you’re making payment on deductible expenses such as school interests or medical expenses, increasing your payments on these deductions can have an effect on your 2017 taxes.

3. Increase withholdings to lower taxes. Does it look like you’ll owe some hefty taxes this year? You can fill out a W-4 and ask your employer to increase your withholdings for the rest of the year to lower down what you owe on your federal income tax. One of the benefits of doing so is that the IRS views withholdings as being paid out evenly throughout the year, which can help you to cover a quarterly tax payment.

4. Contribute the maximum amount allowed on your retirement plan. Contribution to your IRA or employer-sponsored retirement plan can increase your deductibles and lower your taxable income for the year. Try to contribute the maximum amount allowed to reach full benefit.

5. Retirees! Take required retirement plan distributions. Individuals who reach the age of 70 ½ must typically accept required minimum distributions (RMDs) from their retirement plans. Frustratingly enough, failing to do so can lead to a penalty of 50% of the amount that was supposed to be distributed to you.

6. The gift of giving can actually save you. Donating to charities from a taxable account (traditional IRA or 401(k) plan) can lower your tax bill. You should also consider accelerating charitable gifts for the road ahead. The upcoming year could see a reduced value of these deductions.

During the #holiday season #donations are always welcome (and help lower your #tax bill). Click To Tweet

7. Sell underperforming investments. You can reduce taxes on investments by selling investments, stocks, and bonds that have lost value and generated capital loss. This can potentially help to lower tax liability that you might have on your investments.

Tips For Small Businesses

1. Preparation is key. You’ll need to prepare for the hit to your cash flow by reviewing financial reports with your bookkeeper or accountant. You’ll be able to make the proper adjustments by having an idea of your business’s potential tax bill. This will also open the door to discussing whether or not it makes more sense to pay quarterly estimated taxes rather than carrying that large burden in April.

Let the #McAllen CPAs at #AYMCPA help you prepare for #taxseason #2018 early Click To Tweet

2. Defer income and increase expenses. Your small business is going to be taxed on its profits. There are a few simple tax tips that you can follow in order to defer revenue and increase expenditures, just make sure that your small business passes through entities reporting business income and falls under a Schedule C personal tax return. You can contact the McAllen CPA of Abigail Y. Murray, CPA, LLC. if you aren’t sure.

  • Defer income by depositing less money into your business bank account during these last few months of the year (assuming you can handle the cash flow), send out invoices for the month of December late in the month, and defer customer payments until January 2018 if possible.
  • Now comes the easy part – spending money. Assuming that cash flow will not hurt your business for the next couple of months, pay as many business-related bills as possible, consider making some necessary upgrades to equipment (or brand new purchases), purchase offices supplies in bulk that you know are necessary all year round, and contribute to charity.

3. Bosses deserve retirement savings plans too. In the process of running a small business, you might be overly concerned with meeting the needs of your employees and their retirement savings plans. While this is an awesome approach to business ownership, it doesn’t hurt to start contributing to your own retirement plan as well. Whether you are opening a Simple IRA, 401(k), or profit-sharing plan, the contributions you make for your employees and yourself are generally tax-deductible. Make sure that you establish the plan before the end of the year to get the deductions for 2017.

4. Take advantage of startup costs. If you’re a startup business, you may be able to deduct up to $5K in startup costs and an additional $5K in organizational costs. These deductions can be applied to a number of expenses including advertising, employee training and wages, legal and accounting fees, and more. Be aware that these deductions no longer apply after you’ve hit $50K in expenses or organization costs. More than $55K and no deductions will be allowed.

5. Don’t forget to make a charitable contribution. If you’re looking for a tax deduction, donating to a charity, sponsoring at a charitable event, or donating inventory are all generally beneficial to your business.

6. Don’t forget about home, auto, and lunch deductions. As a small business owner, there are a number of deductions that you may be eligible for if you work out of a home office including mortgage interest, insurance, utilities, maintenance, and other items. You can find instructions and IRS Form 8829 here.

Alongside home office deductions, you can also deduct car expenses if you use it for your small business. The IRS allows you to claim standard mileage rate and actual car expenses that include gas, oil, tires, repairs, insurance, registration fees, and more.

Last, but certainly not least, are business-related lunches. As per the IRS, generally, only 50% of business-related meal and entertainment expenses are allowed as a deduction. Still, this can be a meaningful deduction for your business if you find yourself constantly having lunch or dinner meetings with clients.

7. Use a tax professional to get the most deductions and benefits. You may be tempted to handle your taxes alone or to utilize a simple tax service. But you should really consider having your taxes prepared by a tax professional like a CPA, who has the training, experience, and industry know-how to really delve into those taxes and find you the best deductions for your needs. The savings you’ll receive will definitely offset the costs and you can find comfort in knowing that everything was properly filed.

For more tax tips and financial guidance, call up the professionals at Abigail Y. Murray CPA for the support you need and tax expertise you deserve.

Wrap up the tax year on the right note and save yourself some money for when tax season comes around in a few months. And don’t forget to call on the knowledgeable and experienced experts at Abigail Y. Murray CPA in McAllen for the support you need.

Contact our McAllen CPA today at (956) 800-5600 to start making plans for the upcoming year.

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Take Time During September To Avoid Future Tax Troubles

Take Time During September To Avoid Future Tax Troubles

September is a busy month with people and their families getting back into the groove of the school year.

Your McAllen CPA, Abigail Y. Murray CPA, knows that it is also a busy month when it comes to taxes – for individuals, businesses, and corporations alike. There are a number of important deadlines coming up during September that are worth keeping an eye on.

There is also plenty you can do to both catch up and get ahead when it comes to your tax situation.

A Few Key September Tax Deadlines

Labor Day is one of the few, big national markers in September but the following dates are worth keeping in mind as well:

  • September 11 – This day will forever be important in our country for obvious reasons. However, it is important to know that it is also a critical deadline for people whose income relies heavily on tips. For all employees who received more than $20 in tips during August, it is the cut-off date to report them to their employer.
  • September 15 – The 15th is a deadline for a number of different entities. For individuals, it is the due date for the third installment of their 2017 estimated tax. This applies only to those people who have chosen not to pay their tax through withholdings. For partnerships that were given a 5-month extension on their 2016 tax return, the 15th is the deadline to file their return using Form 1065. It is also a due date for both corporations and S-corporations.

There are a number of other deadlines throughout the month that are worth reviewing as soon as possible.

#September has plenty of #tax due dates. Let #MurrayCPA help you stay on top of it. Click To Tweet

Smart Tax Moves You Can Make

Taxes are something that can leave us scrambling from year to year and 2017 is no different. A few smart tax moves to consider this month include:

  1. Many people took the available extension on their 2016 return to give themselves more time to pay.

While the official deadline is not until October 16th, you can avoid accruing additional interest and get all that annoying paperwork out of the way by filing this month. The sooner you get it done the sooner you can start planning for how to best use your return money.

  1. With so many people heading back to school, you should also start looking into any and all available educational tax breaks. The cost of school is a difficult thing for many to manage. From kindergarten to college, education can come out costly.

One option to check out is the Coverdell Education Savings account, which can help pay for elementary and secondary school items like computers.

The American Opportunity Tax Credit has the same function for college students and covers important expenses like textbooks.

Need some help with #education costs? Consider a #Coverdell Education Savings account Click To Tweet
  1. While we have been fortunate here in the Rio Grande Valley to escape the devastation of Hurricane Harvey, it is important for everyone to be prepared not only for the physical effects of a disaster but the financial ones as well.

The IRS has announced tax relief efforts for the counties that were hit hardest in Texas, as well as neighboring states, by Hurricane Harvey and the same will likely be true if our region is affected in the future.

Staying informed in the aftermath of disasters is important to help family members that live in cities hit by disasters and to plan ahead in case your family is in a similar one in the future.

#Tax #relief efforts have been announced for those affected by #HurricaneHarvey Click To Tweet

Don’t let September pass you by without meeting tax due dates and making preparations for tax season!

September is a month of transition from the slower pace of summer to the hecticness of the school year. It is also an important intermediate step between last year’s and this year’s taxes.

At the McAllen CPA office of Abigail Y. Murray CPA, we are here to help guide you through all the different deadlines that your personal tax situation faces. Our staff has the expertise to make that transition quick and problem-free.

Contact us today at 956-800-5600 to set up a consultation. Let us work with you to take care of all your tax questions.

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Tax Tips For Students

Tax Tips For Students

With school coming to an end, are you thinking about a summer job to earn some extra cash?

We here at Abigail Y Murray CPA, LLC  want you to understand the important tax implications that may apply to you if you pick up a summer job – whether you’re a college student or high school student.

If you’re committed to making some extra money this summer, whether it’s for spending or savings for college, it’s important to know that not all the money you make this summer will go straight into your pockets.

You might be taking on an exciting new endeavor like a paid internship or perhaps you’ve taken a job at your local popular steakhouse. Either way, a new job is always exciting when you know you’ll be making your own money.

It’s also the perfect time to cultivate your knowledge about federal income taxes, tax returns, and other tax implications.

Did you know that all tip income is taxable?

All the tips you receive at work are considered income, and when you begin the process of filing your income tax return, you must report all the tips that you receive directly.

According to the Internal Revenue Service Publication 531, employees who receive tips must report it on their income tax return, as well as to their employer. Publication 531 of the tax code also implies that the social security tax rate an employee must pay on tips is 6.2% when you report more than $20 in cash tips.

It is highly recommended that you keep a daily record of your tips.

It’s also important to recognize that tax code rules are different depending on the type of work you do. Sometimes, certain jobs qualify as self-employment such as babysitting, newspaper carriers or distributors, and lawn care services among others.

You may be able to deduct certain costs when filing, and if you’re under 18, you will probably be exempt from Medicare and Social Security taxes.

However, you may be required to figure a few things out like the net profit or net loss from your income-generating services. Generally, self-employed individuals are required to pay a self-employment tax as well as income tax.

Contact Abigail Y. Murray, CPA, LLC in McAllen to learn more about the Self-Employment Tax and if it applies to you.

You’ve probably heard about W-4 Forms.

W-4 Forms play a very important role in the current tax system. They are used by your employer and their purpose is to withhold the proper amount of income taxes from your paycheck.

The amount withheld from your paychecks during the time you work is determined in the W-4 Form. There are such things known as Allowances, however, that can give you some control over your paycheck withholdings.

It’s important to be informed about Allowances that may apply to you and how they can affect how big your tax refund is or whether you could even end up owing taxes. We know federal tax talk can be confusing (and undesirable) at times, but the quicker you learn about it, the easier it will be in the future.

By the way, the W in W-4 stands for withhold. That’s what you call a fun tax fact!

If you’re working this summer before going back to school, you’ll likely want to know how to get your withheld income taxes back from the IRS. Starting a new job comes with many responsibilities and we want to help guide you through the processes.

Contact the accounting offices of Abigail Y. Murray, CPA, LLC today at (956) 800-5600. We’re located in McAllen, TX and serve the Greater Rio Grande Valley area. We’re always prepared to answer your questions and give you the best financial advice.

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Somethings To Know About The POTUS’ New Tax Code Plan

Somethings To Know About The POTUS’ New Tax Code Plan

Did filing your tax return this year pique your interest in the POTUS’ new tax code plan?

A little over two weeks ago, White House National Economic Council Director, Gary Cohn, announced the POTUS’ plan for a simpler tax code. While the potential new tax code changes didn’t come with full details, the overall message was clear – the tax system needs to be simplified.

As was described in late April by the current administration, the new proposal calls for doubling the current standard deduction for American families. This means income tax for couples would not be charged until the first $24,000 of income rather than the current standard of $12,600.

Trump’s proposal also includes cutting down the tax brackets from seven to three (respectively 10%, 25%, and 35%). Currently, tax brackets range from 10% to 39.6% based on income.

While most of us have finally gotten past the anxiety caused by the always stressful tax season, you might have some new concerns and questions about Trump’s tax plan – assuming it’s approved of course.

Abigail Y. Murray, CPA, LLC in McAllen is here to offer you a bit of insight into the plan and how it may affect your financial situation.

Good News: The Plan Can Benefit Parents (And Businesses)

One of the most prominent perks of the potential plan promises to deliver more benefits to families that pay on expenses like daycare for their children.

The POTUS’ plan pitches an increase on the Child and Dependent Care Tax Credit, which is now up to a maximum of $2,100. This credit is available to parents who pay for child dependent care so they are able to go to work, or school, amongst other things.

The new plan also includes a number of provisions that would lower the tax rate for business owners –  small and large alike.

Currently, countless family-owned businesses and small businesses pay tax rates as high as 39.6%. The new administration’s plan would greatly reduce the tax rate for these business owners down to an amazing 15%.

But Wait…This Plan Also Cuts Most Tax Deductions Away

Yes. Literally, most individual state and tax deductions would no longer be implemented in the new tax code plan.

And what exactly does this mean for you? While there is still uncertainty as to the exact specifications it could, unfortunately, mean no more writing off medical expenses, property taxes, and other deductions.

The reality is that there still remains quite a bit of ambiguity surrounding Trump’s tax plan that understandably raises many questions about the individual tax deductions many American families and singles are currently eligible to write off.

Treasury Secretary Steven Munich did add on that as a part of the plan, the current White House administration also intends to keep tax deductions associated to charitable contributions and homeownership.

Ideally, Trump’s proposed tax plan will reduce tax rates while encouraging economic growth. However, the concern always remains; what will these changes mean for individuals and families?

At Abigail Y. Murray, CPA, LLC, your financial well-being is always our top priority.

We want you to first take a step back and breathe for a moment.

At the accounting offices of Abigail Y. Murray CPA in McAllen, Texas we know you might feel a bit overwhelmed with these potential new tax changes, especially as you finally had a break from all this tax talk after filing your tax returns.

But we are here to help. That’s why we stay informed about the latest up-to-date legislative and administrative developments concerning taxes, so that we can provide you the best advice and accounting tips to ensure your financial success.
If you want more information about the proposed tax plan and how it may affect your situation, please contact Abigail Y. Murray, CPA, LLC today at (956) 800-5600.

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Didn’t File Your Taxes? There’s Still a Couple of Options.

Didn’t File Your Taxes? There’s Still a Couple of Options.

Well, it happened.

The tax deadline passed and you didn’t file your return. You might start worrying about the consequences of those actions and how they’ll affect your finances.

Don’t panic just yet, the staff at Abigail Y. Murray, CPA, LLC has the expertise to help you get through this. Your path to sorting your tax situation out begins with being informed about what you are facing.

The first thing you need to know.

The road to relieving tax stress starts with understanding that not filing a tax return needs to be taken seriously. Many possible consequences can come from not filing your return, starting with the fact that it is technically tax fraud if you do not file your return.

While you will likely not be charged with a crime, the IRS will make sure you face the possible penalties. The penalty for failing to file can be as large as 25% of the taxes you owe for the year. Failing to pay similarly holds up to a 25% penalty on the amount due.

That means you could potentially pay up to a 50% penalty on what you owed to begin with. The IRS is also nice enough to charge interest on this amount.

So, what can you do?

You can still get a six-month extension to file your taxes by filing Form 4868. This will require you to estimate what you think you will have to pay in taxes for the year. As a general rule, aim high, because if you pay more than you owe, you will be refunded the extra amount.

This extension does not mean much if you still fail to file your return. It does you no good to not file and hope that no one notices.

If you do not file your return, this opens you up to an unpleasant situation where the IRS will do it for you. With the ability to file a “substitute return”, the IRS will collect any information they can on you, including documents like W-2s, and file a return for you and send you the results.

As nice as it may sound to have someone else do your taxes for you, this scenario will likely not go in your favor. These substitute returns will not come with many deductions and credits, as the IRS does not have much incentive to look for them.

This will result in a larger amount of taxes owed in comparison if you were to file in a traditional manner.

On a positive note, filing your own return might show that you are owed a refund, even if you didn’t initially think you were going to receive one.

Be aware that you will have an additional three years to file and claim your refund before the U.S. Treasury simply accepts it as a “donation” to the government. That alone should be motivation to file your tax return every year, especially if you think you are owed money back from the IRS.

What if I owe?

Coming back to the possibility that you do owe taxes, especially more than you can pay at the time, you still have two options. One, and the simpler of the two, involves setting up a payment plan.

If the amount you owe is less than $50,000, it is possible to arrange an online payment agreement. You will have to fill out a Form 9465 to apply for a payment plan if the amount is higher.

Both payment options will usually allow you up to 72 months to pay the amount owed. It is best to pay these amounts off as soon as possible to save money, as interests and penalties will be tacked on the longer the repayment process takes you.

The second option open to you is to make an offer in compromise. This one is pretty self-explanatory: you make an agreement to pay a portion of your tax bill and the IRS removes the responsibility of paying the rest. This can be a complicated process but it is potentially much cheaper than a payment plan if the IRS agrees with your case.

An experienced firm like Abigail Y. Murray, CPA can help make sure that if you do have a tax bill, every possible tax break will be explored for you.

However you decide to tackle this dilemma, it is always a good idea to consider outside professional help.

If you live in the greater McAllen metro area and haven’t paid your 2016 taxes, Abigail Y. Murray CPA can help guide you through the process and give you financial advice on choosing between a payment plan or an offer in compromise.

Contact us today at (956) 800-5600 for the help you need to overcome any tax return hurdles.

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Last Minute Tax Tips Before the Clock Strikes Twelve

Last Minute Tax Tips Before the Clock Strikes Twelve

It’s that time of year again; the middle of April is nearly upon us, and if you aren’t aware, that means tax due day. That means if you haven’t filed your taxes yet, you are starting to walk on thin ice.

At Abigail Y. Murray, CPA, LLC we know that there are still a couple of cards-up-your sleeve that you can play, but just be careful when gambling with the IRS. They don’t always play with a full deck.

Consider the following last minute tax tips as the clock gets closer to twelve.

You Have More Time than You Think, Sort Of

Anybody who has filed a tax return before probably has the standard deadline drilled into their head: April 15th. However, if you have put it off submitting your taxes for one reason or another, this year you have until April 18th to make a move.

There are two reasons for the deadline change this year. The first one is that April 15th falls on a Saturday. Normally, the deadline would be moved to the following Monday but Washington, D.C. will be celebrating Emancipation Day on April 17th.

Also, in addition to April 18th being the deadline to file, it is also the last day you can apply for an extension. So if you would like to procrastinate a little bit longer, there is that option.

This extension does not mean that you don’t have to pay taxes though. As easy as it is to get more time to file your taxes, you will still have late-payment penalties of 0.5% per month after the April 18th deadline. If you expect to owe taxes, you should plan to make a payment to help you avoid those potential charges that can come with an extension.

There is Someone Out There Ready to Help

With the last days of tax season comes trouble with scheduling an appointment with a tax professional. Luckily, you don’t have to go on a scavenger hunt just to track down someone who can help you.

For those who make $54,000 or less, the Volunteer Income Tax Assistance program in your local community can provide free tax preparation assistance. Everyone who chooses to take this route should take comfort in the fact that IRS-certified volunteers staff these programs.

The IRS’s Free File Program is another option to consider and one that is completely online. Open to more than 70 percent of all taxpayers with an upper-income limit of $64,000, the Free File Program grants access to software from some of the top companies of tax preparation.

Electronic filing has become the norm (and is even recommended by the IRS) and accounts for four out of every five filed tax returns. This method provides the quickest processing and typically takes less time; provided you have all the necessary documents.

The IRS also lets you know they have received your filed tax return immediately after you complete your paperwork. Your refund will get to you quicker and you won’t have to worry about any potential snags or hold-ups in the mail.

Some Additional Things to Remember When Filing

  • Gathering all of the different forms and information you need can sometimes be frustrating. It’s easy to forget something, like a W-2, especially if you have worked at more than one place or moved in the last year. Once you gather all the paperwork together your path to filing gets smoother, assuming of course, that everything is correct.
  • Your employers had to have all W-2 forms mailed out by the end of January. More than likely, everyone should have his or hers by now. But, if you have waited this long to file and found something that looks wrong on your W-2(s), you don’t have to worry. You can call the IRS at 1.800.829.1040 and get the information you need. All you’ll need is your address, Social Security number, and phone number with you when you call.
  • When looking for tax breaks, you might get discouraged as the filing deadline approaches and think that there are not many tax deduction options available to you. However, one thing to consider is the kind of retirement plan you have with your company. If you don’t have one, it might be time to think about contributing to a traditional IRA or a Roth IRA. Paying into a traditional IRA can provide up to $5,500 in deductions for anyone under 50 and $6,500 for people older than 50.
  • While they don’t provide deductions now, the money in Roth IRAs is tax-free when you withdraw it. Either option allows your money to grow tax-free; all you need to consider is where you think your tax bracket will be when you retire.

Don’t Let Not Filing be an Option

It can be scary to face the prospect of having to pay taxes, especially if your finances are not where you would like them to be. Even an extension can be a daunting proposition.

Regardless of your situation, not filing your tax return will always cost you more than not being able to pay the taxes you owe. If you go more than four months without doing it, a 25% penalty on the taxes due and the interest from that total will be your penalty.

Don’t compound potential problems by hoping the IRS doesn’t notice you didn’t do your taxes.

There is still plenty of time and plenty of help for anyone who hasn’t submitted their tax return. Don’t hesitate to give the accounting office of Abigail Y. Murray, CPA, LLC in McAllen, Texas a call today at (956) 800-5600 for the support you need.

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Oh, Those Crazy Taxes

Oh, Those Crazy Taxes

Who doesn’t love tax season? All those wonderful tax codes…millions of tantalizing words detailing obscure taxation rules…keeping up with the nearly 5,000 changes that have occurred over the last decade plus…doesn’t it all sound so amazing?

Maybe we are a little different here at the offices of Abigail Y. Murray, CPA, LLC, but it’s only because we are absolutely motivated to helping our clients limit their tax liability and enhance their refund. While we may be passionate about accounting and taxes, we’re not anything like these crazy tax facts:

  • The US internal revenue code is 2.41 million words alone! That’s not including 7.66 million words of tax regulation. Shakespeare’s works don’t even reach a million words all together. Sorry Bill.
  • There’s no place like Texas. Cowboy boots are exempt from sales tax. Yeehaw!
  • If someone reports their company for tax evasion, they can receive 30% of the amount collected. Um…but you didn’t you hear that from us.
  • Don’t you miss the good ol’ days, like 1913 when the federal tax code was only 400 pages long? Now it’s over 70,000.
  • Remember Albert Einstein? The guy who figured out General Relativity? He once said: “The hardest thing in the world to understand is the Income Tax.” Well, in his defense, he didn’t have the help of Abigail Y. Murray CPA.
  • The instructions to complete the basic 1040, is over 105 pages. Maybe that’s why the majority of Americans think the federal tax code is too convoluted.
  • Speaking of forms and instructions, you can download close to 2,000 tax-related forms and files from the IRS website. Hope your printer has enough ink.
  • The first income tax law was imposed in 1861 to help pay for the Civil War. The current income tax system was placed into law in 1913, before the start of World War I.
  • Sorry to say, but in 2009, Bank of America had an income of $4.4 billion. They didn’t pay a single penny in income tax.
  • The average American spends 13 hours getting their tax return ready. In 2011, the National Taxpayers Union stated that U.S. taxpayers spent more 6.1 billion hours complying with federal tax regulations (and that number has gone up since then)—because why not.
  • Warren Buffett has revealed that his adjusted gross income in 2015 was $11,563,931 and his federal income tax for the year was $1,845,557. That’s a tax rate of 16%. He’s commented several times on how his tax rate is lower than his secretary’s, which depending on how much she earns, is highly plausible.
  • The United States taxes citizens on what they earn in foreign countries, even if they aren’t planning on coming back—and we’re the only country in the world to do it.
  • American’s spend over $27.7 billion doing their taxes.
  • Foreign countries have created tax havens for US corporations. The city of Zug, Switzerland has a population of 26,000 people, but is the headquarters for over 30,000 companies.
  • There has been no known civilization that has not taxed its populace.
  • In 1987, about 7 million children vanished. That was the year that the IRS started requiring taxpayers to list the Social Security Numbers of their children on tax forms. We wonder where all those children disappeared to.
  • Tax evasion cost the federal government $458 billion a year between 2008 and 2010. Unfortunately, only $52 billion is expected to be recovered each year. Still, 81.7% of taxes owed make it to the IRS.
  • More than 16 million individuals and businesses owed the IRS $373 billion in unpaid federal taxes in 2011.

And one more for the road…

  • The Savers Tax Credit is an exceptional tax credit designed to help lower-income families contribute to retirement plans. If you qualify, this credit will allow you to write off money you put into your retirement plan—from a 401K to a traditional or Roth IRA.

The adjusted gross income (AGI) limits for this credit are:

  • Single: $30,750 in 2016 and $31,000 in 2017
  • Head of household: $46,125 in 2016 and $46,500 in 2017
  • Married and filing jointly: $61,500 in 2016 and $62,000 in 2017

Your credit will be 10%, 20%, or 50% of your contribution, depending on your AGI.

Want to learn more interesting tax facts and tips for optimizing tax deductions? Contact Abigail Y. Murray CPA today!

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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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What You Need to Know About the Upcoming IRS Program

What You Need to Know About the Upcoming IRS Program

Over $400 billion is owed in back taxes to the U.S. Treasury and the Internal Revenue Service (IRS) is after more than 7 million taxpayers, and now they have enlisted the help of private debt collectors.

Back in late 2015, the Fixing America’s Surface Transportation (FAST) Act, was authorized to fund federal surface transportation spending. This is where the IRS came into play.

They are now required to obtain the assistance of private debt collectors for delinquent tax debts. Which means that if you’ve been avoiding IRS notices and letters, you may just start receiving a whole new slew of calls.

But don’t worry, Abigail Y. Murray CPA, PLLC is here to save you. We can help you with deal with the stress of IRS audits and issues. Our services are effective, economical, and we’re not afraid to play ball.

However, in order for us to help you reach your financial destination, you have to know what to expect from the road ahead. So here are 7 facts you need to know about the upcoming IRS program.

  • It’s coming very soon. The use of private debt collections is set to start in 2017. The selection of these private debt collection agencies is currently happening and their names will soon be published online on the IRS website.
  • Taxpayers will be notified by the IRS if a private debt collector is to assigned to them. Before the collection process begins, those who owe back taxes will receive two notifications. The first letter will consist of the IRS notifying the taxpayer about the private debt collector. The second letter will be sent by the debt collectors themselves after assignment.
  • These notices should also go to a taxpayer’s representative on file. The intent in this step is to notify taxpayers about their situation and also help to relieve fears about collection imposter schemes.

  • Private debt collectors will not be able to enforce fines. As a bit of a relief, collectors will not be able to file liens or issues levies on your account. (This does not mean that the IRS won’t already have a tax lien on you before the private collectors contact you).
  • Also, just as they will not be able put a lien on taxpayers, it’s important to realize that collectors won’t be able to get liens removed either. Only the IRS can address enforcement actions.

  • The goal of private debt collectors is to find “missing” taxpayers. When a taxpayer cannot be located, the IRS removes them from their “active collection” database. The job of these private debt collectors will be to locate these individuals. This has raised some concerns about the methods collectors will utilize to find and collect owed monies.
  • Taxpayers experiencing economic hardship will not be included. While the exact specifications have not been finalized, taxpayers who are currently going through economic hardship and have an outstanding debt can negotiate a suspension of their obligation to pay. If you have already established a deal with the IRS under this agreement, you’ll likely be excluded from this new IRS debt collection program.
  • Collection alternatives are still available through the IRS. For taxpayers whose situation requires alternative payment solutions, such as an Offer in Compromise, the IRS is still available to assist you.
  • Private debt collectors are going after cases that include:
    • More than one-third of the 10-year collection statute has expired
    • No IRS employee is assigned to the debt
    • There has been no contact with the IRS in a year and the taxpayer has not sought remediation
    • Collectors will not pursue victims of tax identity theft, taxpayers in federally declared disaster areas, or combat zones

With this new wave of private debt collectors set to begin their work in the next few months, taxpayers are increasingly nervous (and aware) about possible IRS scams. That’s why you’ll need the support, dedication, and knowledge of a CPA who can get you through the process of dealing with the IRS and debt collectors, while ensuring your financial safety.

Let Murray CPA be the guiding hand that helps you through the rough patches.

At Abigail Y. Murray, CPA, LLC, you’re not just another customer, that’s why we strive to offer the best accounting service in the Upper Rio Grande Valley and surrounding areas. So when you need help with your personal or business taxes, Murray CPA will make sure to focus on every detail to help you meet your goals.

Our FREE initial consultation will help us to analyze and strategize a specific game plan designed for you.

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