The Earned Income Tax Credit (also known as the EITC or EIC) is a special benefit offered to low or middle income taxpayers. Unlike some other forms of income assistance, the EITC is only available if you have “Earned income.” That is, income you’ve received either from working for someone or by owning and operating a business of your own, income from sources like unemployment benefits won’t count. For some individuals, the EITC may not only reduce your tax burden, but can actually give you a larger tax return. This makes it a valuable income boost for some individuals and can benefit the economy at large, since the higher tax returns are then reinvested into the economy by paying past due bills or making larger purchases that the taxpayer may not have been able to otherwise afford. According to the Center on Budget and Policy Priorities, in 2016 the EITC lifted about 5.8 million people out of poverty, including about 3 million children.
The amount of the EITC that is received by a given tax payer is based on a number of factors, including their earned income for the year as well as the number of qualifying dependants they may have. While it’s true that taxpayers with children can expect a larger credit, you don’t necessarily have to have a child or other kind of dependant to receive the EITC. For the purposes of the EITC, dependants will need to fit a number of qualifications including filing status and living arrangements. Because of these varying qualifications, it can be difficult for the average taxpayer to know if they qualify for the Earned Income Tax Credit. The IRS does have an online assistant that can help you predict if you would qualify, but our certified tax professionals can review your entire tax situation and make sure that even if you don’t qualify for the EITC, you are receiving the full tax return that you should be qualifying for. Give us a call today!
It’s a new year, and that means new opportunities to take full ownership of your finances. As with any other major change in your personal life, creating financial health starts with just a few simple steps. It can seem overwhelming, but by taking them one at a time, you will find yourself in a more stable and less stressful place with only a few easy tasks.
Review Your Budget - To begin, get a sense of where things stand. Chances are, some things have changed in your budget this year. Car insurances rates may have adjusted, utility bills may increased, or you may have reduced your credit card debt in the previous year. Review your budget, identifying what items have changed. It would also be helpful to have your bank statements from the previous year available. Look at how your actual spending compares to what your budget was. Did you go over budget on any particular items? If you don’t already have a budget, this is also a great time to start one. Begin by looking at your current spending habits and document where everything is going each month. Then you can identify what opportunities you have to save.
Check recurring charges - While reviewing your bank statements for your budget, this is also an opportunity to look for recurring charges that you may have forgotten about. Did you sign up for a free trial of some online training program that you never touched after the first week? There’s a good chance they’ve still been charging you each month since. Same goes for websites like Hulu or Spotify. Many of these services have comparatively low monthly costs, and if you forget to cancel after your free trial expires, you may not notice the charges if you don’t have a budget or watch your accounts closely. If you are using these services, that’s great, hold onto them. But if they’re subscriptions you barely, if ever, use, now might is the time to go through and cancel them.
See if you can boost your retirement savings - After you’ve gone through your budget and canceled some subscriptions, hopefully you’ve found some money available in your monthly budget to increase your retirement savings! Most Americans simply don’t have enough in their retirement plan to cover the expenses they can expect, and it can be difficult to find a way to change that when you feel like your budget is too tight. With the openings that you’ve hopefully found by now, you can make some increases to your savings to put you in a better position than you were before.
Check your credit report- This is also a good opportunity to check your credit score. By law, you are entitled to a free copy of your credit report from each of the major credit bureaus once a year. AnnualCreditReport.com is a government mandated site run by the bureaus to facilitate this process. While there are a number of free services out there that can provide you your report, they all require the ability to sell your information for marketing purposes. This is the only site that is free while still offering you your privacy. If you would prefer, you can also make the request by mail, you will need to fill out this form from the FTC and mail it to this address:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
Locate any unclaimed funds - Finally, you can take this opportunity to check for any unclaimed funds in your name. These are funds that are in your name but were never received by you for some reason. It may include uncashed payroll checks from previous jobs, or refunds from unused gift cards, or a variety of other sources. Each state has their own process for claiming these funds through the government, and you will need to provide proof of your identity, which may be different for each state. You want to be sure you’re checking an official government source for this search as some individuals have set up “services” online that charge you a fee for these funds, even though they use the same free resources that are available to you. The first place to start would be the US Federal Government site, which can be found here. It also includes links to the relevant sites for each state.
Schedule time with a financial planner - In the same way that you want to meet with a doctor to get the best possible physical health, meeting with a financial planner is the best way to ensure your financial health. Our experienced professionals will review the information you’ve gained in the above steps and show you how to develop a higher level plan. Identifying opportunities to get even more out of the retirement savings you have, assessing your short and long term needs, and developing a strategy to ensure you get the success you deserve. Call us today!
No one enjoys doing their taxes, but paying someone to do your taxes often seems just as odious. Particularly if you’re looking at the possibility of needing to pay additional taxes with your return, the idea of paying someone to prepare the return itself seems like pouring salt on your wound. What is worth remembering is that there’s a number of factors that can complicate your taxes significantly, making professional assistance not only a simpler option, but also a more cost-effective one.
Tax Code Changes - Effective this year, there were a number of changes made to the US tax code which change the deductions you may be able to claim. The standard deduction increased, but certain itemized deductions were removed. Personal exemptions, which allowed you to take an exemption for yourself, before taking exemptions for your dependents. While this is supposed to be replaced by the doubling of the standard deduction, this may cause a tax burden increase for some families. Several other deductions were changed or removed as well. A tax professional will help you navigate these changes and how they can affect your current tax situation.
App income - Services like Uber, Instacart, DoorDash, and others are great for offering flexibility for those of us who use them for bringing in extra cash around working a more traditional job or even instead of one. What you may not realize, however, is that this income must be taxed just like with more traditional employment. Those taxes become more complicated because these services usually do not withhold taxes, leaving you to pay not just income taxes but also social security tax. Depending on how much income you made from your app income, you may have been required to file quarterly tax returns. If these filings were not made, there will be penalties that you may face. A tax professional will help you make sure your records are correctly filed, and if you missed the previous filings, a professional will help rectify the situation and put you in the best possible legal situation in the circumstances. They also can help make sure you are positioned to correct your filings going forward.
Time - One of the biggest benefits of using a tax professional is time. Organizing and filing your tax returns takes a significant amount of time. The practice and experience that a professional brings to bear on your taxes means they’ll be able to not only complete your return with better accuracy but also efficiency. It takes most Americans on average 13 hours to complete their tax returns. While you will still need to collect your documents, a tax professional can help with the rest, taking the burden of time and stress off of your plate.
Regardless of which reason applies to you, hiring a tax professional can help make the job of tax preparation a process that includes less dread and stress. Call today to schedule time to ask about how we can best help you.
The end of the year is upon us, and for many, it’s time to make your final deductible donations for the year. This is a crucial practice that encourages responsible giving to worthy groups, while also allowing taxpayers to reduce their tax burden.
In order to take advantage of charitable deductions, you will need to itemize your deductions on your tax return. This means that taxpayers who instead will use the standard deduction will not benefit. If you are unsure of whether you will be using itemized deductions, we can assist with making some
While it’s true that most charities qualify for tax deduction in return for donations, not all do. So first, you need to verify the charity you are donating to qualifies. The IRS has an online tool that can be used to verify charities, which you can find here. It’s worth noting that some charities, like churches, group ruling subordinates, and governmental units will still qualify but not be listed.
You may also want to check on the effectiveness of your donation. Several organizations will offer background information or ratings of charities. GuideStar is a website that offers data drawn from public filings with the IRS on different charitable organizations for free. A premium membership will also grant you access to raw financial data, letting you see how the organizations spend the dollars they receive on things like marketing and salaries. The Better Business Bureau offers ratings on charities based on a set of benchmarks, and report when charities refuse to release requested data. GiveWell is a relatively new player in the realm of charity evaluations. They use financial analysis to identify how efficiently lives are saved by the dollars donated to different charities. They also offer full access to the research and data they use to make their determinations, and make suggestions of the charity that offers the highest life saving impact per dollar donated. (Currently, their highest rated charity is Malaria Consortium, which offers treatment to prevent malaria in children in sub-Saharan Africa.)
You may want to consider donating locally however. This has the additional benefit of allowing you to be more personally invested in the charity of your choice. Rather than just sending a check, you can also visit and volunteer. Local homeless shelters often need hands to help with laundry or meal service, or you can volunteer with local school programs for benefiting reading skills. Not only does this connect you more deeply with your community, the more holistic approach to giving can lead to a more satisfying experience in the long term.
No matter how you choose to give, we will work with you to make sure it’s reflected on your tax filings correctly to give you the best impact. Call us today to schedule time to review your financial plans.
Thinking about going in the Cosmetology & Barber Industry review this IRS publication for tax tips.
We have a number of clients that are in this industry and are familiar with the different types of pitfalls associated with being a shop owner, independent chair renter, or tipped employee. Industries that have the potential for a great deal of cash transfer are always under the tax agency watchful eye. If you feel unsure as to how to file or properly document throughout the year Contact Us for a free consultation.
By Analyzing Income Streams
Occasionally every person poses the question to themselves, whether they are making enough money, and how can they maximize the amount of money available in their life. This goes for everyone from the business owner an office downtown to the couple that both work to receive a W-2 wage and have a home in a suburb.
So the real question is, how much does it cost me to make the money that I make?