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Category Archives: Tax Preparation

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I Owe Tax on That?
March 14 2022 RgKAdmin14 Tax Tips, Tax Preparation 0 comments Tags: Gambling tax deductions, scholarship and financial aid taxes, gambling taxes, unemployment tax, Social Security benefits taxes, alimony taxes

5 Surprising Taxable Items

Wages and self-employment earnings are taxable, but what about the random cash or financial benefits you receive through other means? If something of value changes hands, you can bet the IRS considers a way to tax it. Here are five taxable items that might surprise you:

  1. Scholarships and financial aid. Applying for scholarships and financial aid are top priorities for parents of college-bound children. But be careful — if any part of the award your child receives goes toward anything except tuition, it might be taxable. This could include room, board, books, travel expenses or aid received in exchange for work (e.g., tutoring or research).

    Tip:
     When receiving an award, review the details to determine if any part of it is taxable. Don’t forget to review state rules as well. While most scholarships and aid are tax-free, no one needs a tax surprise.
  1. Gambling winnings. Hooray! You hit the trifecta for the Kentucky Derby. But guess what? Technically, all gambling winnings are taxable, including casino games, lottery tickets and sports betting. Thankfully, the IRS allows you to deduct your gambling losses (to the extent of winnings) as an itemized deduction, so keep good records. For more detailed information about gambling and taxes check out last month’s blog: https://robertjkratz.com/court-is-in-session-notable-tax-court-cases/

    Tip:
     Know when the gambling establishment is required to report your winnings. It varies by type of betting. For instance, the filing threshold for winnings from fantasy sports betting and horse racing is $600, while slot machines and bingo are typically $1,200. But beware, the gambling facility and state requirements may lower the limit.
  1. Unemployment compensation. Congress gave taxpayers a one-year reprieve in 2020 from paying taxes on unemployment income. Unfortunately, this tax break did not get extended for the 2021 tax year. So unless Congress passes a law extending the 2020 tax break, unemployment will once again be taxable starting with your 2021 tax return.

    Tip:
     If you are collecting unemployment, you can either have taxes withheld and receive the net amount or make estimated payments to cover the tax liability.
  1. Social Security benefits. If your income is high enough after you retire, you could owe income taxes on up to 85% of the Social Security benefits you receive.

    Tip:
     Consider if delaying when you start collecting Social Security benefits makes sense for you. Waiting to start benefits means you’ll avoid paying taxes on your Social Security benefits for now, plus you’ll get a bigger payment each month you delay until you reach age 70.
  1. Alimony Deductable. Prior to 2019, alimony was generally deductible by the person making alimony payments, with the recipient generally required to report alimony payments received as taxable income. Now the situation is flipped: For divorce and separation agreements executed since December 31, 2018, alimony is no longer deductible by the payer, and alimony payments received are not reported as income.

    Tip:
     Alimony payments no longer need to be made in cash. Consider having the low-income earning spouse take more retirement assets such as 401(k)s and IRAs in exchange for reduced alimony payments. This arrangement would allow the higher-earning spouse to make alimony payments by transferring retirement funds without paying income taxes on it.

When in doubt, it’s a good idea to keep accurate records so your tax liability can be correctly calculated, and you don’t get stuck paying more than what’s required.

This blog provides summary information regarding the subject matter at the time of publishing. Please call our office at 610-296-2500 with any questions on how this information may impact your situation. This material may not be published, rewritten, or redistributed without permission, except as noted here. All rights reserved.

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Get a Jump On Your Taxes
October 28 2021 RgKAdmin14 Tax Preparation 0 comments

This year, 2021, may again prove to be challenging relative to your taxes. Preparing for taxes early can not only save you time, but it may also save you money.

FEMA dollars provided to you due to Hurricane Ida damages, other government benefits, unemployment benefits, or working multiple jobs (several examples) may complicate your taxes. There are formerly temporary deductions that have been made permanent, as in medical deductions. According to the New York Times, there is now “a lower threshold for deducting medical expenses. You can continue to deduct unreimbursed medical expenses that exceed 7.5 percent of their income, instead of 10 percent. To take the deduction, filers must itemize.”

If you have had anything unusual occur that you believe may impact your taxes, preparing your taxes in advance is vitally important. Along with your tax advisor at Robert J. Kratz, you can get things rolling and ensure your taxes are filed on time, without the concern of late filing penalties.

You may find the following checklist helpful.

Let’s start with your basic information:

  • Name and full address
  • The names and relationships of all family members
  • Social Security numbers for all family members
  • Your filing status, i.e. Married, Single, Head of Household, and so on.

Next, you need your income documentation:

  • W2s
  • 1099s
  • Unemployment benefit statements
  • Social Security benefit statements
  • Rental property income
  • Documentation of any other income you received
  • Alimony
  • Other business-related income

Now that you have established your income, you can take a look at your possible deductions:

  • IRA contributions
  • IRA withdrawals
  • Mortgage Interest
  • Real estate taxes
  • Any other taxes, i.e. city, township, earned income tax
  • Charitable contributions (cash, miles driven, other donations, etc. – political contributions are not tax-deductible
  • Medical expenses (including insurance premiums if substantial after-tax premiums paid)
  • Unreimbursed employee expenses (personal expenses paid for business, job search costs, uniforms, etc.)
  • Child and/or dependent care expenses
  • Business use of home expenses (square footage of office, not square footage of house)

Finally, make a list of any questions you have about possible deductions.

This blog provides summary information regarding the subject matter at the time of publishing. Please call our office at 610-296-2500 with any questions on how this information may impact your situation. This material may not be published, rewritten, or redistributed without permission, except as noted here. This blog includes or may include links to third-party Internet websites controlled and maintained by others. When accessing these links the user leaves this blog. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does ROBERT J KRATZ & CO have any control over, or responsibility for, the content of any such Websites. All rights reserved.

 

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