What are the Tax Benefits of Child Adoption

(Paid) Public speakerAdopting a child takes a great deal of courage and love from parents who want to bring a young person into their lives. There are so many children out there in need of a loving home, and an adoption can provide this for them. Because of the significant expenses often associated with an adoption, adoptive parents can take advantage of some IRS tax benefits to help reduce their tax obligations.

The Adoption Tax Credit

One financially beneficial way of getting a tax break from an adoption is to claim the federal adoption tax credit on your return. This nonrefundable credit is classified as a per-child credit, meaning it would double if you adopted two children within the same calendar year. For tax year 2014, its value is worth a maximum of $13,190 per child. Parents who adopt a child with special needs are eligible to claim the full value of the adoption tax credit without having to specifically document their adoption-related costs.

Requirements to Claim the Adoption Tax Credit

To claim the federal adoption tax credit, certain qualified adoption expenses must be met. These include any fees you pay to an adoption agency, court costs, expenses associated with hiring an attorney for the adoption process, and any travel expenses you incur throughout this life-changing experience. For tax year 2014, parents who have a modified adjusted gross income (MAGI) below $197,880 are eligible to claim the full value of the credit. Parents who earn over $237,880 cannot claim this credit. Those whose income levels fall between these two amounts can claim a partial amount of the credit until it is ultimately phased out. This tax-saving opportunity can be claimed by calculating your expenses on Form 8839 and then reporting this information on Form 1040.

The Adoption Benefits Exclusion

Another route you can take to earn a tax break for adoption costs is to use the adoption benefits exclusion. Many employers offer an adoption assistance program to their employees. In most cases, employees who adopt a child can participate by excluding up to $13,190 from their taxable income for the year in which they adopt a child. This amount is for tax year 2014. Employers generally report these benefits on an employee’s W-2 form. The same income limit of $197,880 is in effect before the credit is gradually phased out for taxpayers who opt for this exclusion option.

Remember that both of these tax-saving measures for adoptions can be claimed simultaneously. However, you cannot claim them for the same adoption-related expenses, and any exclusion of expenses must be claimed first prior to claiming any eligible amount of the credit.

Learn more about IRS tax credits and deduction opportunities that can reduce your tax bill by working with the accounting experts at 1-800Accountant. Call 1-800-222-6868 or click over to www.1800accountant.com.

4 Transportation Tips for Small Business Owners

The vehicle deduction is just one of the many beneficial transportation tips for small business owners worth using.

The vehicle deduction is just one of the many beneficial transportation tips for small business owners worth using. (Image credit: Flickr Creative Commons)

Like the title of the 1980s comedy hit Planes, Trains, and Automobiles, small business owners often find themselves driving, flying, and riding public transit in order to conduct their trades and make the most out of their for-profit or nonprofit ventures. Because travel can be a big part of business ownership, check out these 5 transportation tips for small business owners:

– Consider carpooling.

When it makes sense for everyone, consider carpooling. Offer car rides to your fellow employees, or take them up on their offers to ride with them. Carpooling is a fantastic way to save money because of how much gas costs, particularly if transportation is a major aspect of a small business. Plus, if you travel with coworkers together, you should be saving on time since you aren’t coordinating when to meet at a specific location and wind up waiting around for others to arrive. While entrepreneurs who work out of a home office may not be able to use this strategy as much, it’s still worth considering when the opportunities present themselves.

– Claim the vehicle deduction on your tax return.

Small business owners who drive their personal vehicles for business reasons are generally eligible to write off vehicle expenses as a tax deduction when filing with the IRS. There are two different ways to claim the vehicle deduction. You can claim actual mileage, which refers to how many miles you put on your speedometer for business-related transportation. The standard rate for 2014 deduction purposes is 56 cents per mile. In laymen’s terms, you can deduct 56 cents for every mile you drive that is related to your small business. The other option is to write off actual vehicle expenses. This means totaling up all of your business-related vehicle costs and deducting the actual amount. Eligible expenses include gas, tolls, vehicle maintenance/repairs, and insurance. Consider making the calculation for both options to find out which one can give you the largest deductible amount.

– Deduct other business travel costs

In addition to the vehicle deduction, there are other routes you can take – pun fully intended – to write off transportation expenses. If they are incurred for business reasons, you can write off airfare, rental cars, cab fares, public transit costs, and other related expenses. Numerous costs incurred here and there are common for business travelers and add up quickly, which is why you should document them for tax and financial purposes.

– Hang on to and organize all relevant receipts.

It’s imperative to maintain an organized file of all relevant receipts you get that document your business-related travel expenses. This is because the IRS wants you to prove that any travel costs you’re writing off on your tax return were indeed spent on business transportation rather than for personal reasons. It’s also wise to write down what each travel cost you deduct is actually for. An example is to notate on an airline receipt that you flew to New York City for an important business meeting. Your chances of being able to legitimately claim transportation costs as a tax deduction will go up when you have all the details about each receipt.

For more small business transportation tips, and to learn additional ways of reducing your business tax liability, turn to 1-800Accountant today. Call 1-800-222-6868 or visit www.1800accountant.com.

2015 Tax Season Could Spell Major Issues, Delays

The 2015 tax season could spell some major problems and delays, according to IRS commissioner John Koskinen.

The 2015 tax season could spell some major problems and delays, according to IRS commissioner John Koskinen.

After last year’s delay to the IRS tax season and refunds being mailed late, American taxpayers may be a bit weary of the issues they’ve had to endure when filing their taxes with the IRS. Unfortunately, the 2015 tax season is not shaping up to be much better. In fact, it could even be more of a challenge.

IRS commissioner John Koskinen recently stated that taxpayers should anticipate some hiccups once the 2015 tax season officially kicks off. First off, there is a chance that the official launch date of the season will have to be pushed back, much like it was in 2014. This is because Congress continues to shuffle its feet on decision-making regarding nearly 50 tax extenders, including several deductions and credits. If there is a delay to the start of the season, it would mean a shorter tax season during which taxpayers would have a shorter period of when they can file. In turn, a delay to the start of the season would also delay the receipt of tax refunds.

Once the 2015 tax season does begin, Koskinen expects some challenges revolving around phone communication and the availability of representatives to assist callers with tax questions. Due to budget cutbacks, he predicts nearly half of all callers to the IRS may not be able to get through to speak with someone about their specific tax situations. More specifically, IRS phone service availability is expected to be at 53%. This figure would be down significantly from the already low 72% phone service availability during the 2014 tax season. For callers who will be able to get through, the average hold time is projected to be 34 minutes, meaning many callers will have to wait on hold much longer than this.

“All we can do is try to maximize our services as well as we can; as well as we can is still going to be miserable,” Koskinen said. “You really do get what you pay for.”

According to Koskinen, finding enough money to pump into the IRS agency budget is the biggest hurdle of all. That’s because the House of Representatives voted to cut the agency’s 2015 budget by $341 million. On the flipside, the Senate proposed to increase it by $240 million. Still, this would be well below funding levels from as far back as 2010.

In addition, the federal tax collection agency continues to struggle financially with managing the Affordable Care Act and the Foreign Account Tax Compliance Act. The IRS asked for $430 million to help facilitate the implementation of the ACA, but the agency received no funding whatsoever from Congress.

To avoid all of this turmoil, let 1-800Accountant handle your entire personal and business tax-filing needs. Whether you are a single filer or file a joint return and own multiple businesses, 1-800Accountant is always available to assist you and answer all of your tax questions. The accountants will ensure that your taxes are filed properly and on time, and they’ll do what they can to make sure you receive your refund from the IRS in a timely manner. To learn more, call 1-800-222-6868 or check out www.1800accountant.com.

Image credit: The image included in this blog post is used with permission via the Creative Commons license through Flickr.

IRS Reveals 2015 Income Tax Brackets, Other Important Info

With a new calendar year on the horizon comes new tax brackets, a new personal exemption, and a new standard deduction for American taxpayers.

When the ball drops in Times Square on New Year’s Eve, the IRS will implement some new and adjusted tax rates. Keep in mind that these new rates apply to tax year 2015, which means taxpayers will use them when filing their taxes in 2016.

Here are the 2015 income tax brackets:

Individual filers

  • $0 to $9,225 = 10%
  • $9,226 to $37,450 = 15%
  • $37,451 to $90,750 = 25%
  • $90,751 to $189,300 = 25%
  • $189,301 to $411,500 = 33%
  • $411,501 to $413,200 = 35%
  • $413,201+ = 39.6%

Married filing jointly

  • $0 to $18,450 = 10%
  • $18,451 to $74,900 = 15%
  • $74,901 to $151,200 = 25%
  • $151,201 to $230,450 = 28%
  • $230,451 to $411,500 = 33%
  • $411,501 to $464,850 = 35%
  • $464,851+ = 39.6%

Married filing separately

  • $0 to $9,225 = 10%
  • $9,226 to $37,450 = 15%
  • $37,451 to $75,600 = 25%
  • $75,601 to $115,225 = 28%
  • $115,226 to $205,750     = 33%
  • $205,751 to $232,425 = 35%
  • $232,426+ = 39.6%

Head-of-household filers

  • $0 to $13,150 = 10%
  • $13,151 to $50,200 = 15%
  • $50,201 to $129,600 = 25%
  • $129,601 to $209,850 = 28%
  • $209,851 to $411,500 = 33%
  • $411,501 to $439,000 = 35%
  • $439,001+ = 39.6%

Standard deduction

These are the standard deduction amounts for 2015;

  • Single filers: $6,300
  • Joint filers: $12,600
  • Married filing separately: $6,300
  • Head-of-household filers: $9,250
  • Surviving spouses: $12,600

Personal exemption

For tax year 2015, the personal exemption amount is set at $4,000. This is up from the $3,950 figure from 2014. The personal exemption deduction for high-income earners is phased out.

To learn more about the 2015 income tax brackets, and to find out what’s ahead in the IRS tax and accounting space for small business owners, turn to the accounting experts at 1-800Accountant. Call 1-800-222-6868 or click over to www.1800accountant.com.