Tax Tips

Is Your Holiday Gift-Giving Creating a Tax Liability?

With the holidays and the start of a new year approaching, it’s natural to start thinking about who’s on your gift list this season. Gifts and charitable contributions given in 2015 can help make your tax burden lighter, which could be an especially important consideration if your year has been a prosperous one. If you’ve given gift or inheritance this year, you need to know whether these assets are taxable.

‘Tis the season to talk to your CPA to learn how gifts affect your tax status and what gifting and donations before year’s end could mean for your 2016 tax return.

Like an inheritance, a gift can count as taxable income. In 2015, the annual exclusion for gifts received is $14,000. In other words, if you make a gift below that amount, you do not need to report the amount on your income tax forms for the year. In the case of a cash gift, figuring the value is straightforward, but for gifts of property, assessing fair market value for tax purposes is vital. Working through a local Long Island CPA firm ensures you won’t face any surprises in 2016.

How are gifts that are more volatile in value such as property or stock estimated for tax purposes? Timing is critical here because the IRS evaluates the gift based on its fair market value at the time it was given. In other words, if you received shares of stock valued at $5,000 in January 2015 and sell them for $10,000 in December, you are responsible for taxes on the $5,000 profit even though the total value of the gift in 2015 did not exceed the $14,000 individual gift limit.

Let’s look at a popular gift for the holidays that will almost certainly exceed the exemption limit: a new car.

That $14,000 2015 limit is not without exceptions, but these are limited to special cases. Some medical expenses, tuition, and other education expenses may be exempt from taxation even if they exceed the cap. In the case of tuition, the gift must be paid directly to the educational institution. If, for example, you were to pay for a semester of college for a child or grandchild, you would need to do so directly to ensure it remained a tax-exempt gift; if the money goes to the student first, it then becomes taxable once it exceeds the individual cap. Similarly, medical expenses can qualify as gifts too, but only if the giver pays the care provider or insurance company directly.

The IRS tracks annual gift-giving because every person has a lifetime exemption amount past which gifts become taxable. Currently, this lifetime limit is $5.43 million per person. If you’re married, you and your spouse can combine to exclude up to $10.86 million from taxes. Gifts of property, businesses, and other highly valuable assets count toward this lifetime sum so the IRS can ensure that owners pay the appropriate taxes on them.

While the IRS takes no notice of the usual cashmere sweaters and colognes that get exchanged as gifts for the holidays, it does require larger gifts to be noted on tax returns. If you have given generous gifts this year, talk to your Long Island accountant to learn more about your tax responsibilities.

Copyright © 2015 CPA Services. All Rights Reserved.

Should You Itemize Your Deductions?

When preparing your taxes, how do you determine whether to use standard deductions or itemize them? Some tax preparers advise itemized deductions for those who are single and own no property, but general rules may not be applicable to your specific situation. Choosing a Long Island CPA who takes each client’s case on an individual basis is the ideal way to get the full value of your deductions, but before tax time, it’s worth looking at factors that influence this important decision.

Itemized deductions are a sound choice for most people who own a home and have a mortgage. Ownership is not the sole determining factor in deciding whether to optimize, though. This list of qualifying expenses will give you an idea of what to ask your accountant about when you set up a meeting. The items here include both limited and unlimited deductions, each of which is noted.

Medical expenses – This limited deduction is crucial for any family that has incurred medical expenses that were not covered or reimbursed by an insurance provider. If you carry a high deductible on your medical insurance, you may be able to claim a significant amount of your medical costs as a deduction.

Taxes – The IRS only expects you to pay taxes once and does not tax other tax payments. The payments you have made toward real estate taxes, property tax, sales tax, business-related taxes, and state income tax are an unlimited deduction on your tax returns.

Mortgage interest – Depending on the size and scope of your mortgage, you may be able to claim interest paid on it as a deduction. This category also includes interest you may have paid to buy your home as well as any interest on mortgage payments.

Investment interest – As with mortgage interest, the interest you pay to invest in financial investment property may be worth going through the itemized deduction process. Part of the CPA services an accounting firm offers is going through your investment portfolio to assess whether your interest paid on stocks, bonds, and mutual funds falls into this type of limited deduction.

Charitable contributions – For philanthropic business owners and generous donors, using charitable contributions for itemized deductions is especially important. To qualify, donations must go to a not-for-profit organization, a designation that includes donations to public school systems, many political organizations, religious institutions, and traditional charities.

Estate taxes – Payment of taxes assessed on earned income are not taxable again and should be itemized as a deduction.

Gambling losses – For those who have incurred gambling losses, itemizing these expenses as a deduction can ease financial burdens. Because deducting losses is limited based on money earned from gambling winnings, talk to your Long Island CPA before making any tax decisions.

Job-related expenses – If you have been on the hunt for a new position, you may be able to claim costs related to your job search. While these expenses are limited, they can help defray the cost of job-related education, travel, professional dues, uniforms, and training.

Tax preparation – The expense of having a qualified accountant prepare your taxes is itself a tax-deductible cost.

This list is only a partial one, and it’s always advisable to ask your CPA about specific expenses. Working with a Long Island CPA who is available ensures that you get the most up to date advice on tax deductions, investments, and every aspect of your financial planning.

© CPA Services 2015 All Rights Reserved.

When Does Your Taxable Status Change?

April 15 is the date most people think about taxes, but events that affect your tax status occur throughout the year. What’s more, some events affect only federal taxes, while others impact your state and local status too. A Long Island accountant will tell you more about how your taxable status might change in response to the following life events. With advice from a CPA, you can choose the right time to make planned changes and prepare for the surprises life has in store.

Retirement Planning Changes

Investing in a 401(k), IRA, or other tax-deferred retirement program has immediate effects on your tax status. Because you place some of your taxable income into your retirement plan, you lower your tax obligation at the end of the year. Your CPA is able to help you choose the right time to start investing for retirement to save money today while planning for the future.


Whether you sell investments and assets such as stocks to reinvest elsewhere, launch a business, or make your money more agile, these sales change your tax status. Keep more of your wealth invested and working for you until it’s the right time to sell when you have sound financial advice from an experienced CPA.

Interstate Moves

Depending on when and where you move and your employment status, your tax burden could span multiple states. Many states have tax laws that require any person who physically works in that state for even a single day to pay state taxes. Other states are more lenient and invoke 10- or 14-day rules. If you plan a move to or from New York, accountants who are familiar with the state’s tax laws can help you lighten the impact the move could have on your tax obligations.

Life Events

Marriages, births, retirement, and other significant lifetime events can transform your tax status immediately. While few couples are likely to reschedule a wedding to accommodate tax laws, planning for an event that is still distant could mean the difference between a local honeymoon and a dream vacation. Discuss any impending life events with your CPA and talk about plans to help you comply with tax requirements for unforeseen events.

Starting or Selling a Business

The professional equivalent to personal life-changing events, starting your own business or selling the company also triggers a cascade of tax status changes. It is particularly important to plan these major changes with the assistance of a qualified accountant.

Major Income Changes

Lottery winnings, a significant raise at work, a windfall from investments – all are positive changes, yet they wreak havoc on your tax plan for the year. A financial advisor who can help you protect your wealth, safeguard you from risk, and comply with tax law is a must if your fortunes take a sudden turn.

The Internal Revenue Service thinks about taxes throughout the year, not only in April, and so does the New York Department of Revenue. The more you can prepare ahead for your tax obligations by working with a Long Island CPA, the more readily you can protect your wealth and avoid penalties.

© CPA Services 2015 All Rights Reserved.

Tax Tips for Start-Up Business Owners

Almost everyone is familiar with paying personal income taxes, but taxes for businesses are unfamiliar territory for most people. Understanding your tax responsibilities and learning what you can do to avoid over-payment is a challenge to handle alone, but with advice from a CPA firm that has experience with helping start-up companies succeed, you ensure your business is financially sound and fully compliant from the outset. A local Long Island accountant can help brick and mortar or online businesses meet their tax obligations.

Know Your Business Type

What kind of business are you establishing? Tax laws treat sole proprietorships, corporations, S-corporations, partnerships, and self-employment as different entities. You will fill out different tax forms for each of them, and your choices here have a significant impact on your tax responsibilities. You will always need to pay an income tax, but self-employment taxes, sales taxes, and payroll taxes may also factor into your tax plan. At this stage, a CPA’s financial advice is invaluable. Choosing a local firm is also wise; a Long Island CPA, for example, can advise you not only on federal tax laws but also state and local tax expectations you must meet. Continue reading

Tax Tips for Telecommuters

Whether you hire telecommuting personnel or are a long-distance worker yourself, you’ve probably already encountered one of the coming decade’s biggest tax challenges. Until recently, people who lived in one state and worked in another were relatively rare, and most of them commuted just a few miles across state lines. Today, a web designer who’s based in Florida might work for a firm in New York. Which state gets that person’s tax dollars? How do accounting firms handle withholding? Can telecommuters avoid paying double the state tax?

Turning telecommuting tax troubles over to your CPA firm is the ideal way to ensure full compliance while keeping your personnel from paying too much. These scenarios tell you more about your telecommuting workers’ specific status and what it means for your business. Continue reading

Updating Your W-4

For most employees, the annual April tax deadline is the only significant one. Self-employed people, independent contractors and employers have additional accounting deadlines that are equally important. As the calendar year draws to a close, employers must collect updated W-4 forms from their personnel. In many states, an equivalent form is also necessary. In some cases, these new forms are straightforward, but for others, simple paperwork is anything but. A Certified Public Accountant can help tame the tangle of red tape and let business owners and their employees focus on their work, not their tax status.

A W-4 form lets the Internal Revenue Service know about the individual’s filing status, including dependent exemptions, so it’s vital to keep these records updated to ensure accurate withholding. While the form itself is short, it may not always tell the full story, and simple calculations may not be appropriate for every employee. A conventional W-4 form cannot take into account all available deductions, credits and adjustments. If a form contains errors, straightening them out later can be even more of a challenge. Continue reading

Back-to-School Tax Advice

Education expenses have risen geometrically since the turn of the century. To manage these expenses and preserve more of their income and savings, families are turning to their CPAs for tax advice on managing hefty tuitions or school loans. Here are some key tax tips to help you keep more of your money and stay on the right side of the Internal Revenue Service.

Know Your Deductibles

The list of education-related tax deductibles is long and varied enough to puzzle anyone who is less than familiar with tax law. For example, transportation costs may be deductible, but school uniforms are not – even when your child’s school requires them. Private school tuition is also not deductible, a fact that many people who prepare their own taxes may not know. Families with children under the age of 13 or at the college level have special restrictions and additional deductibles, so your tax status could change as children progress through their academic careers.

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The Top Tax Issues Small Businesses Face for 2014

After a year that included a governmental shutdown, preparation for sweeping changes to healthcare and a possible introduction of online sales tax, small businesses must pay close attention to what 2014 will bring. With financial guidance from your CPA firm, you can weather the upcoming tax changes with relative ease, but understanding the changes can also help you make informed decisions.

Individual Insurance Requirements and Exemptions

Under the Affordable Care Act (ACA), most people must buy healthcare insurance that meets or exceeds the new federal minimum standards. Although the law provides for some exceptions, people who have no insurance either through the Healthcare Marketplace or an employer could face penalties in 2014. Conversely, you may be eligible for tax deductions on your healthcare expenses even if you retain your current type and level of insurance. If you are self-employed, the thicket of new requirements, exemptions and deductions can be dense; your accountant can help you make your way through it. Continue reading

3 Tax Changes You Need To Know About In 2014

With the looming fiscal cliff at the beginning of 2013 and the mid-year calls for tax reform, this year has been unusually tempestuous for taxpayers. While changes to next year’s tax laws are far from a certainty, financial experts are already looking at ways to prepare their clients’ business and personal tax returns in 2014. Here are a few of the most likely changes and how to prepare for them before they become pressing concerns in April. Continue reading

Are You Ready for Tax Increases?

The fiscal cliff and “Taxmageddon” have been hot topics for financial analysts and CPA firms, but figuring out what it means for you and your personal or business finances can be a challenge. Due to a number of tax cuts and exemptions that expired or are due to expire in early 2013, many individuals and businesses will be scrambling to find ways to avoid a major tax increase this year. You may have already noticed a reduction in your take-home pay; that’s thanks to a 2 percent tax cut on payroll tax that expired on January 1. These changes are only the first step off the fiscal cliff, though, and more tax breaks are slated to be phased out in coming years.

Understanding the changing tax landscape and maintaining compliance while protecting your financial assets may take additional expertise and quick action throughout the year to ensure a less painful tax season in 2014. Take these steps today and create a parachute to carry you safely over future fiscal cliffs. Continue reading