Tax Tacklers Blog for Taxes | Tax Preparation Phoenixville, PA - Part 3

10 Bizarre Tax Write Off’s

As you prepare your taxes, keep in mind that there are many possible tax deductions that may apply to you. In fact, there are so many options that some deductibles are a bit more specific, while others are just plain bizarre.

  1. Meeting on a tropical island

This time of year, when snow is piled on the ground and temperatures plunge below freezing, traveling to a warmer climate sounds pretty appealing. If you escape to a tropical island for a meeting relating to your business, you may be able to deduct the expenses. The IRS lists several locations where this applies, including Aruba, Bermuda, Jamaica and the Dominican Republic. Of course, you must be able to prove why it was reasonable to hold the meeting there. If you’d rather be on the ocean than lying on a beach near it, there are also deductions related to attending conventions, seminars and other similar meetings on a cruise ship.

Source: IRS

  1. Dressing like a rock star

Lady Gaga’s meat dress at the 2010 MTV Video Music Awards was more than a spectacle; it was also tax deductible. According to the IRS, “musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear”.

Unless Madonna can pull off going to the grocery store in something she wore on stage, chances are she got a tax deduction for her get-up.

Source: IRS

  1. Fishing tackle boxes

The 2004 American Jobs Creation Bill affected an unlikely item: fishing-tackle boxes. Before the bill was enacted, manufacturers had to pay a 10% excise tax on their boxes. But Rep. Jerry Weller (R-Ill.) added a provision that eliminated the tax. According to his spokesman, “the problem is that companies are now marketing sewing kits or jewelry boxes [as fishing tackle boxes]…but they’re not subject to the excise tax”.

Source: LA Times

      4. Whaling

The 2004 American Jobs Creation Act also helped Alaskan whaling captains save a boat-load of money. In a provision by former Senator Ted Stevens, whalers can take a $10,000 deduction for money spent on whaling expenses.

Source: IRS

  1. Body oil

If you pump iron for a living, then you can save a bundle on body oil. In 2004, the Tax Court ruled that a professional bodybuilder could deduct the cost of body oil as a business expense because he used it to make his muscles shine during competitions. However, the court didn’t allow deductions for the bodybuilder’s daily supplements (which included buffalo meat and vitamin and energy shakes).

Source: US Tax Court

  1. Breast Implants

An exotic dancer wanted to write off her breast implants as a business expense. She claimed she got  the surgical implants to make her a size 56-FF and therefore receive more tips. Though the IRS initially challenged the deduction, but a Tax Court judge later ruled that the surgery did help increase her income and that the breasts (which weighed 10 pounds each) were so bulky she couldn’t derive personal benefit from them.

Source: LA Times

  1. Damage from Drunk Driving

A man arrested for drunk driving was able to deduct the cost of repairing damage to his car. Apparently, he knew ahead of time that he would be drinking and arranged for a ride home. But after drinking, he thought he was okay to drive and his car ended up sliding off the road. The Tax Court let him deduct the cost of the damage as casualty loss because he had tried to act reasonably by arranging a ride. The judge also pointed out that his blood alcohol was at 0.09%, just over the state’s limit of 0.08%.

Source: US Tax Court

  1. Free Beer

Speaking of drinking and driving, in the 1970’s the owner of a service station had a promotion offering free beer to customers. The Tax Court ruled that the giveaway counted as “advertising and promotion” and allowed the owner to write it off as a business expense.

Source: Leagle

9. Cat Food

How did two junkyard owners manage to pass off cat food as a business expense? They argued that it was a business expense because they used the food to attract feral cats. The cats, in turn kept away rats and snakes from the property and made it more appealing to customers.

Source: US Tax Court

10.  Landscaping

Wish yardwork could be deducted from your taxes? Well if you have a home office, you might be able to do just that. A man worked from home, and often met with clients at his house. He said that’s why it was important that he kept his yard and home presentable. A judge eventually ruled that he could deduct the cost of landscaping and for repairs made to his driveway.

Source: US Tax Court

What Does Tax Planning Mean?

tax planning

April will be here sooner than you think, which means it’s time to focus on tax planning. But first, it’s essential to know what tax planning is and how to do it efficiently.

Investopedia defines tax planning as:

“Logical analysis of a financial situation or plan from a tax perspective, to align financial goals with tax efficiency planning. The purpose of tax planning is to discover how to accomplish all of the other elements of a financial plan in the most tax-efficient manner possible. Tax planning thus allows the other elements of a financial plan to interact more effectively by minimizing tax liability.”

So what does that mean? Basically, tax planning is organizing your financial affairs in order to reduce your taxes as much as possible.

Of course, everyone’s finances are different, and therefore their tax preparation will require different forms and information. The IRS has plenty of tools to help you determine what you’ll need.

First, find out if you need to file by visiting this page on IRS.gov. If you do need to file, determine exactly what forms you’ll need to file by visiting the Interactive Tax Assistant.

This checklist will tell you common forms and information you should have on hand. That may include:

-Prior tax returns

-Recent investment statements

-Recent 401k or other tax-deferred savings plan statements

-All information pertaining to any currently owned individual retirement accounts (IRSs)

-Info about current pension plans

-Current life, long-term care and disability insurance policies

-Recent statements from all mortgages

-A list of any debt balances and corresponding interest rates

Of course, the easiest way to prepare for filing your taxes is to speak with a professional tax preparer. They can help you regardless of your financial situation. Check out all the services that tax planners can offer.

Tips to Using Mobile Apps for Tax Tracking

mobile apps

Thanks to smartphones, you now have the ability to track your taxes whenever and wherever you want. While there are many app out there that let you access your tax information, there are still a few important things to keep in mind as you figure out which apps to use, and how to use them.

  1. Privacy

To access your status, many tax tracking apps will need private information from you like your Social Security number. That’s why its important to research each app ahead of time to make sure your information will stay secure. Many apps have a privacy policy that you should review before downloading. Reading other users’ reviews will also give you an idea of how trustworthy the app is.

  1. Be prepared to wait

While apps can speed up the tax tracking process, some things are not instantaneous. The IRS’ app, IRS2GO , reminds users that there may be a wait when it comes to checking your refund status. Users can check their refund status 24 hours after the IRS acknowledges that it received an e-file return. The wait for mailed paper returns is four weeks. Also, the app is updated once a day so there’s no reason to check multiple times a day.

  1. Year-Round Use

There are several apps to use year-round that will make filing your taxes remarkably easier. iXpenseIT tracks expenses, receipts and other information that you’ll need once tax season rolls around. Its photo feature lets you make any receipt a digital receipt, making it easier to stay organized. If you’re going on a business trip, Expensify can help you keep track of deductibles like meals and mileages. And speaking of mileages, Mileage Log+  can help you track mileage logs from frequent trips so it’s easier to get a deduction or reimbursement.

 

10 Transition Tips for Job Seekers

10tips

Have you had to ask yourself how do I handle a job transition? Job transition is a time of change, challenge and opportunity. Addressing a few key points can make the process easier and, in turn, allow you to maximize the outcome. Even if you aren’t currently in the middle of a job transition, these points can help you navigate your way to success.

  1. Roll over your retirement plan.
    Using an advisor who can assist you in designing a retirement strategy in order to gain control of your investment options, eliminate the potential difficulties accessing your account
    in the future, create the ability to access partial withdrawals if liquidity is needed while in transition, and to design a customized strategy that will address both accumulation of funds and retirement fund distribution.
  2. Health Insurance (COBRA)
    Review your options for health insurance (including COBRA). If you decide to transfer to another plan, do not discontinue your in-house plan until the new coverage begins. Continuation of coverage is important in qualifying for a new plan and minimizing rates.
  3. Life Insurance
    Did you know life insurance is usually not portable and it is important to have some insurance outside of your employer. Begin research before changing jobs as the underwriting process may take several weeks.
  4. Inventory your existing assets and determine liquidity.
    Prioritize which assets you would use if you needed to access your savings while taking into consideration taxation and penalties.
  5. Budget Plan
    If you have not yet secured new employment, create a budget plan that includes cash flow projections using sources that may include unemployment compensation, savings accounts, and employer severance payments. This can help to make the transition period less stressful.
  6. Benefit Plan
    If you are currently employed, review the choices available through the new benefit plan and make choices that consider the “big picture” and are also compatible with your existing portfolio structure.
  7. Tax Liability
    Project your tax liability for the year and adjust withholdings. Multiple jobs, large severance payments and unemployment compensation all take your tax withholdings off autopilot and shift them into proactive mode. Avoid surprises and make tax-minimizing choices by working with an advisor to make projections and adjust payments to the IRS.
  8. Consult an Advisor
    If you have stock options and your company is being purchased or merged. Formulate a plan that includes a diversification strategy and determine the tax impact to maximize the opportunity.
  9. Group Benefits
    Review group benefits you may loose like disability insurance, pretax programs for childcare, access to a group long term care policy, or education savings through payroll deduction and determine a gap strategy.
  10. Spouse Benefit Comparision
    If you are married and were using the plans provided by your employer, gather information regarding your spouse’s plans so you can compare them to your new options and make the best choice.

 Julia Brufke Wenger is Founder of Phoenix Tax Consultants, LLC. She has been a member of the Phoenixville business community since 1990 and currently serves as an active member of the Phoenixville Regional  Chamber of Commerce. Julia is graduated from Villanova University with a BA in  Accounting.

FEBRUARY TASK: LIST YOUR DEBTS

list all debt infoIt is Month 2 of Julie’s Personal Powerful Financial Plan! I am starting to get a handle of what is what when it comes to our financial future.

Our task was gathering our debt information. Unlike our assets, I am well aware of all the debt, especially with the monthly automatic payments.  What I was not as familiar with was the structure of the debt.

Like many young families we carry two main debts: our mortgage and multiple student loans. When it comes to our taxes we are able to deduct the interest paid in our tax returns for both our mortgage and student loans. We were very aware of timelines, rates and payments for our main debts but it was not as clear for our other debts. We took the extra step to not only file this information in a binder but all created an excel file to help us in organizing and prioritizing our debts.

My favorite part is the excel file that contained all the information in one place. This was extremely helpful when we were able to sort, filter and move items based on the length of time for certain payments as well as opportunities to pay off higher interest rates sooner.

Why I liked this task?  After we created the master file which organized our logins, debt information and both sat down and talked about the numbers. We started adding total debts (WOW, it was a lot higher when you added it all together then I thought), then we broke it down for our milestones of when certain items would be paid off. Instead of looking at our total debt we are now focusing on smaller milestones along the way. Although the total debt is the same – we are approaching it differently – we are starting to build a plan that makes sense for us and that will help us save money.

We both agree our priority is to focus on paying down the high interest rate credit cards first.

Our excel file had the following headings: Type of Debt, Balance, URL, Start Date, End Date, # of Payments Remaining, Interest Rate, Monthly Payment Minimum, Credit Limit, Options for Reducing Interest Rate, Penalties (if applicable), and a Notes Tab

Current Debt:

  • Mortgage (2 loans, varying rates)
  • Student Loans (7 separate loans, varying rates)
  • Car Payment (3 months remaining)
  • Credit Cards (8 credit cards, varying rates, most higher interest) Read More