Eight Tax-Time Errors to Avoid

error
If you make a mistake on your tax return, it usually takes the IRS longer to process it. The IRS may have to contact you about that mistake before your return is processed. This will delay the receipt of your tax refund.

The IRS reminds filers that e-filing their tax return greatly lowers the chance of errors. In fact, taxpayers are about twenty times more likely to make a mistake on their return if they file a paper return instead of e-filing their return.

Here are eight common errors to avoid:

1. Wrong or missing Social Security numbers. Be sure you enter SSNs for yourself and others on your tax return exactly as they are on the Social Security cards.

2. Names wrong or misspelled. Be sure you enter names of all individuals on your tax return exactly as they are on their Social Security cards.

3. Filing status errors. Choose the right filing status. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) With Dependent Child. See Publication 501, Exemptions, Standard Deduction and Filing Information, to help you choose the right one. E-filing your tax return will also help you choose the right filing status.

4. Math mistakes. If you file a paper tax return, double check the math. If you e-file, the software does the math for you. For example, if your Social Security benefits are taxable, check to ensure you figured the taxable portion correctly.

5. Errors in figuring credits, deductions. Take your time and read the instructions in your tax booklet carefully. Many filers make mistakes figuring their Earned Income Tax Credit, Child and Dependent Care Credit and the standard deduction. For example, if you are age 65 or older or blind check to make sure you claim the correct, larger standard deduction amount.

6. Wrong bank account numbers. Direct deposit is the fast, easy and safe way to receive your tax refund. Make sure you enter your bank routing and account numbers correctly.

7. Forms not signed, dated. An unsigned tax return is like an unsigned check – it’s invalid. Remember both spouses must sign a joint return.

8. Electronic signature errors. If you e-file your tax return, you will sign the return electronically using a Personal Identification Number. For security purposes, the software will ask you to enter the Adjusted Gross Income from your originally-filed 2011 federal tax return. Do not use the AGI amount from an amended 2011 return or an AGI provided to you if the IRS corrected your return. You may also use last year’s PIN if you e-filed last year and remember your PIN.

For tax needs feel free to contact us at 314-993-4285.

Tax Return Forget Me Nots

Red bow on finger

 

Before you submit your tax documents to your accountant for completion of your tax return, take a look at the top 5 most commonly overlooked items below to make sure you’ve included everything:

1. Long term care insurance:  Missouri allows for a deduction from taxable income for a portion of your long term care insurance. Many other states allow a deduction or sometimes a tax credit for these premiums.  Although this is one of the questions in the full version of the organizer, because we are so conditioned that medical expense is limited to 10 % of AGI, we forget that the state may allow for some benefit of these itemized deductions. Long term care insurance should be included on your return to take full advantage of this opportunity.

2. Electronic 1099s:  Many brokerage firms now have the option of sending your 1099s directly to your CPA.  All firms are different, but you may be able to save our email address as your CPA in your brokerage online account and have the 1099s securely emailed to us when they are ready.

3. Business expenses and AMT:  The top marginal tax rate is now 39.6%.  This could mean you are out of the Alternative Minimum Tax (AMT) now or will be in the near future.  While you were not deducting any unreimbursed business expenses while in AMT, now you could deduct them.  If you do not track and send them to us, you will not deduct them.  Remember to send us all business expenses (including mileage driven) with your tax documents so you are not missing out on these deductions.  Also, although there are a few states that do, most states do not have AMT so your expenses would be deductible on the state side even if you are still in AMT so go ahead and send everything to us even if you think you will be in AMT.

4. Non Cash Charitable Donations:  Donating items to charities such as the Salvation Army or Goodwill can save you substantial tax.  Websites such as www.itsdeductible.com and www.satruck.org/valueguide give the approximate values of used furniture, clothing, or appliances.  They make what used to be a difficult process, tracking values of donated items, easy and it will save you real money.  Many times, the values these websites give for items in good condition are higher then you may expect.

5. Charitable Mileage and Supplies:  If you use your vehicle for charitable organizations, you can deduct these miles as charitable donations.  If you purchase supplies on behalf of a charitable organization to use at an event, these are charitable donations.  There is a place on your organize for each of these items so remember to include them if they apply to you.

Thanks for allowing the HKA family to work with you again this year on your 2013 tax returns.  If you are not currently a client and wish to learn more about us and what we can do for you, please click here.

Ten Things to Know about Farm Income and Deductions

farm
If you earn money managing or working on a farm, you are in the farming business. Farms include plantations, ranches, ranges and orchards. Farmers may raise livestock, poultry or fish, or grow fruits or vegetables. Here are 10 things about farm income and expenses that the IRS wants you to know.

1. Crop insurance proceeds. Insurance payments from crop damage count as income. They should generally be reported the year they are received.

2. Deductible farm expenses. Farmers can deduct ordinary and necessary expenses as business expenses. An ordinary farming expense is one that is common and accepted in the farming business. A necessary expense is one that is appropriate for that business.

3. Employees and hired help. You can deduct reasonable wages you paid to your farm’s full and part-time workers. You must withhold Social Security, Medicare and income taxes from your employees’ wages.

4. Items purchased for resale. If you purchased livestock and other items for resale, you may be able to deduct their cost in the year of the sale. This includes freight charges for transporting livestock to your farm.

5. Repayment of loans. You can only deduct the interest you paid on a loan if the loan proceeds are used for your farming business. You cannot deduct interest on a loan used for personal expenses.

6. Weather-related sales. Bad weather may force you to sell more livestock or poultry than you normally would. If so, you may be able to postpone reporting a gain from the sale of the additional animals.

7. Net operating losses. If deductible expenses are more than income for the year, you may have a net operating loss. You can carry that loss over to other years and deduct it. You may get a refund of part or all of the income tax you paid for past years, or you may be able to reduce your tax in future years.

8. Farm income averaging. You may be able to average some or all of the current year’s farm income by spreading it out over the past three years. This may lower your taxes if your farm income is high in the current year and low in one or more of the past three years. This method does not change your prior year tax. It only uses the prior year information to figure your current year tax.Things to Know.

9. Fuel and road use. You may be able to claim a tax credit or refund of federal excise taxes on fuel used on your farm for farm work.

10. Farmers Tax Guide. More information about farm income and deductions is in Publication 225, Farmer’s Tax Guide. You can download it at IRS.gov, or call the IRS at 800-TAX-FORM (800-829-3676) to have it mailed to you.

Purchase Real Estate with A Self-Directed IRA

self_directed_IRA_investments

It is a known fact that you cannot use your Individual Retirement Account (IRA) to invest in real estate.  Although this is true with a traditional 401(k) or traditional IRA, you can invest in real estate through the use of a self-directed IRA.

A self-directed IRA is an IRA like any other under IRS guidelines in terms of annual contributions, required minimum distributions, and types such as Traditional, ROTH, Simple, and SEP.  While most traditional IRAs limit your investments to publicly traded securities, self-directed IRAs are open to almost any investment, except for life insurance, collectibles, and S-Corporations.

Below are some key points you should review before you decide to use your self-directed IRA to purchase real estate:

  1. The property must be a new purchase directly into the IRA and cannot be a property you already own or a personal residence.
  2. You must have enough cash to purchase the property.  You cannot take out a mortgage in your IRA to finance the purchase.
  3. You cannot borrow money from the property or use it as security for a loan.
  4. You and your relatives are barred from occupying or working on the property.  If you are considering renting the property, you need a property manager to find tenants and all expenses for repairs and improvements must come out of the IRA.

While it is possible to use a self-directed IRA to purchase real estate it may become more complicated to manage its use than if it were purchased and operated outside of the IRA.

Feel free to give us a call if you have any questions or want to discuss this further.

Top Six Tax Tips for the Self-Employed

boss

When you are self-employed, it typically means you work for yourself, as an independent contractor, or own your own business. Here are six key points the IRS would like you to know about self-employment and self-employment taxes:

1. Self-employment income can include pay that you receive for part-time work you do out of your home. This could include income you earn in addition to your regular job.

2. Self-employed individuals file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with their Form 1040.

3. If you are self-employed, you generally have to pay self-employment tax as well as income tax. Self-employment tax includes Social Security and Medicare taxes. You figure this tax using Schedule SE, Self-Employment Tax.

4. If you are self-employed you may have to make estimated tax payments. People typically make estimated tax payments to pay taxes on income that is not subject to withholding. If you do not make estimated tax payments, you may have to pay a penalty when you file your income tax return. The underpayment of estimated tax penalty applies if you do not pay enough taxes during the year.

5. When you file your tax return, you can deduct some business expenses for the costs you paid to run your trade or business. You can deduct most business expenses in full, but some costs must be ‘capitalized.’ This means you can deduct a portion of the expense each year over a period of years.

6. You may deduct only the costs that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business.

HKA December Charities: Giving Feels Good

Print

This month marked yet another milestone for Hauk Kruse & Associates (HKA).  Bill Kruse was named an official member of the Board of Directors for The Angel Band Project (ABP).

ABP is an organization that utilizes music to promote healing, raise awareness and create positive social change for survivors of sexual violence. It began as a benefit album after the tragic rape and murder of a lifelong friend of the founders of the organization. At the funeral of the friend who passed, there was more singing than speaking. The family and fiancée of the victim sang with such emotion, which ultimately led them to found The Angel Band Project and record an album in an effort to help others suffering in the wake of sexual violence.

Paid for entirely through donations and recorded live in four cities, the ABP family was joined by dozens of professional singers and musicians from the orchestra pits of Broadway to the bassist for Tracy Chapman. All proceeds help victims of sexual violence.

This month, ABP will be holding a contest on Facebook in which they will compete with other charities for the most comments on their Facebook page.  To participate in this contest and assist ABP with winning a great video prize package for their shows, follow the process outlined below:

  1. LIKE the StoryTrack Facebook page https://www.facebook.com/storytrackvideo
  2. Post a comment with the name of Angel Band Project to vote
  3. Share with your friends. One vote per person will be counted.

To donate to ABP, please visit their click HERE. Deadline for this contest is January 3rd, 2014.

HKA Supports Charities: Lunch at St Patrick Center, St. Louis

SAMSUNG

(From Left) Jessie Murphy & Bill Kruse serving their community.

On November 11th, 2013, the HKA family partnered up with The St Patrick Center to donate their time during the “Thanksgiving” season to helping others in need.  As the temperature quickly drops in the mid-western metropolis, it is now more important than ever to help those less fortunate.

“The St Patrick Center outing was a wonderful opportunity to expose and remind our Firm.  We have been exposed to a need and found it to be an easy need to fill.  This will help desensitize us to volunteerism in general.  It didn’t hurt, wasn’t scary, and felt good.  It also showed us what a successful institution of helping others looks like and will serve as a reminder should others try to convince us that these charities do not accomplish their goals of service.

Abby with Davey, from the St Patrick Center

Abby with Davey, from the St Patrick Center

We were also reminded of the need.  We saw the need first hand and it is real.  What little we do is appreciated, from the smiles on the faces to the glowing face of one young gentleman in particular of about 4 who skipped up to see us and stole our heart with his openness and happiness.  It reminds me of a quote I once read.. “The caliber of the soul of a great city can be seen in the faces of her most needy.”  As I looked into the faces of those served at St Patrick Center I did not see malice or hatred, I saw something different, not always hope, but not resignation either, and where there is at least some hope, much can be gained. ”  – Bill Kruse, Managing Partner

SAMSUNG

Blake Will and Brian Godfroid serving lunch

“There is no better feeling at the end of the day then knowing that you played a role in making someone’s life better, if only for an hour”  – Jessie Murphy, Administrative Asst.

To learn more about The St Patrick Center or to donate visit http://www.stpatrickcenter.org today.