Thursday, January 23, 2014

Are You Required to File a 2013 US Tax Return? What if I live outside of the U.S.?


Are You Required to File a 2013 US Tax Return?


According to the IRS, generally, you must file a return for 2013 if your gross income from worldwide sources is at least the amount of your standard deduction and exemptions.  This criteria applies if you are a U.S. citizen, or a resident alien and if you are in the United States or abroad.  

In addition to the income requirement for filing you may still need to file if your self employment income exceeds a certain amount and you also may want to file to get excess taxes withheld refunded.

Filing Requirements
If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad.
Your income, filing status, and age generally determine whether you must file an income tax return. Generally, you must file a return for 2013 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table.
Filing Status*Amount
Single$10,000
65 or older$11,500
Head of household$12,850
65 or older$14,350
Qualifying widow(er)$16,100
65 or older$17,300
Married filing jointly$20,000
Not living with spouse at end of year$3,900
One spouse 65 or older$21,200
Both spouses 65 or older$22,400
Married filing separately$3,900
*If you are the dependent of another taxpayer, see the instructions for Form 1040 for more information on whether you must file a return.

Gross income.
   This includes all income you receive in the form of money, goods, property, and services that is not exempt from tax.
  For purposes of determining whether you must file a return, gross income includes any income that you can exclude as foreign earned income or as a foreign housing amount.
If you are self-employed, your gross income includes the amount on Part I, line 7 of Schedule C (Form 1040), Profit or Loss From Business, or line 1 of Schedule C-EZ (Form 1040), Net Profit From Business.
Self-employed individuals.   If your net earnings from self-employment are $400 or more, you must file a return even if your gross income is below the amount listed for your filing status in the table shown earlier. Net earnings from self-employment are defined in Publication 334, Tax Guide for Small Business.
65 or older.   You are considered to be age 65 on the day before your 65th birthday. For example, if your 65th birthday is on January 1, 2014, you are considered 65 for 2013.
Residents of U.S. possessions.   If you are (or were) a bona fide resident of a U.S. possession, you may be required to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession. See the instructions for the form for more information.

You May Still WANT TO file

Why would you WANT TO file if you don't have to?  Maybe to get some of your money back or to get other money you may be entitled to.  In addition you may need to a filed tax return for other reasons, like to meet requirements for a loan application.  Here is what the IRS said about filing if you don't have to:
Even if you do not have to file, you should file a federal income tax return if you can get money back (for example, you had income tax withheld from your pay; you qualify for the earned income credit; or you qualify for the additional child tax credit). See Who Should File in Publication 501, Exemptions, Standard Deduction and Filing Information, for more examples.

But what if I live outside of the U.S.? 

These requirements typically apply whether you are living in the U.S. or abroad.  No matter where you live a person who is required to file a U.S. income tax return, like a U.S. citizen living in another country, you are required to report all your worldwide income. While it might seem logical that you should not have to file if all your income was earned abroad, you are required to report all of your worldwide income on your U.S. Tax Return.  Logic has nothing to do with the requirement. Obviously.

While you have are required to report worldwide income you may be able to exclude some of it on your tax return if you live abroad.  Don't be confused by the terminology, you still have to report the worldwide income on your tax return but the term exclude refers to backing the income out for income taxes purposes after it has been reported.  So you report it on one line of your tax return and then you get to back it out later if you meet the requirements.  In most cases the excluded income can still be subject to employment taxes.  See my prior post on this subject.

Reporting Foreign Bank and Financial Accounts

In addition, if you had over $10,000 in a foreign account at any time during 2013 you may have some other reporting requirements.  I plan to soon have another post published on this subject.

Plug

If you want a CPA Superhero to help you leap tall building like challenges to succeed then feel free to contact me using my information below. You can have a free half hour initial consultation.


Jeff Haywood, CPA
The CPA Superhero
972-439-1955
jeff.jhtaxes@gmail.com

Follow the CPA Superhero on Twitter too at:
twitter.com/jeffhaywoodCPA



My posts contain general information that does not fit every situation, they are not all inclusive, and as always for your tax situation everything "depends on facts and circumstances."  In addition, the information/IRS requirements are always subject to change.  So call me to talk about your specific facts and circumstances and what you want to accomplish.

Wednesday, January 22, 2014

5 After Year-End Opportunities to Reduce Your 2013 Taxes



It's not too late to take action to reduce your U.S. income taxes for 2013.  Here are some post year-end tips to reduce your 2013 taxes.

Estimated Tax Payments

Paying estimated taxes, what you project you will owe, can lower the amount of the check you will write when you file your tax return.  While it won't reduce your actual income taxes it can reduce any penalty for under payment of taxes.  The estimated tax payment for the fourth quarter was due January 15th but you can still make estimated tax payments.  So you can project the amount you will owe on your taxes and send a payment in with form 1040-ES.  This can be complicated and if you need assistance I would be glad to help you as your CPA.

IRA Contributions

If you were under 50 years of age in 2013 you may be able contribute and deduct from income up to $5,500 or your taxable compensation for the year, which ever is smaller.  If you were 50 or older before 2014 your limits are higher, at $6,500 or your taxable compensation for the year and again which ever is smaller.  You have until April 15, 2014 to make your contribution. Be careful to specify to your financial adviser that the contribution is for your 2013 taxes.  

If some or all of your income is considered self-employment income, you have an additional option -- a Simplified Employee Pension (SEP) plan. You have until the due date of your tax return, including extensions, to set up and fund your SEP for 2013. In addition, you can contribute up to 25 percent of your net earnings from self-employment (backing out the contributions themselves), up to a comfortable $51,000 for 2013.

Accrual Based Business

Remember for your accrual based business you can include expenses that you incurred and were invoiced for before year-end even if they have not been paid yet.  On the other hand you also have to count income that invoiced even if you have not received it yet.

Cash Based Business

Remember too for your cash based business that any expenses you put on a credit card before year-end can be deducted in 2013.  So carefully enter your credit card transactions for 2013 into your books/accounting software.

Auto and Travel Expenses

Depending on how your vehicles have been accounted for in the past you may be able to choose between actual expenses and using the standard mileage rate to deduction your auto expenses.  In addition if you travel overnight for your business you may be able to choose between actual and per-diem expenses.  In both of these areas a little work to make sure you have records of your mileage and overnight travel may enable you to save money on your tax return.  So now is the time to review 2013 and your calander and make sure you are getting the full benefit from what the IRS allows you to deduct for your business and and un-reimbursed employee expenses.

Sometimes a little knowledge can save you some cash at tax time.  


If you want a CPA Superhero to help you leap tall building like challenges to succeed then feel free to contact me using my information below. You can have a free half hour initial consultation.



Jeff Haywood, CPA
The CPA Superhero
972-439-1955
jeff.jhtaxes@gmail.com

Follow the CPA Superhero on Twitter too at:
twitter.com/thecpasuperhero



My posts contain general information that does not fit every situation, they are not all inclusive, and as always for your tax situation everything "depends on facts and circumstances."  In addition, the information/IRS requirements are always subject to change.  So call me to talk about your specific facts and circumstances and what you want to accomplish.

Monday, January 20, 2014

Seven Reasons Why You Should be Investing After Tax Dollars!!!!!!!



Investing Is For YOU!!!!!!!

It's time to put your money to work for YOU.  Your tax return should show dividends, interest or other investment income.  Why? Because investments are opportunities to make things happen for you now and into retirement.

Seven Reasons Why You Should be Investing After Tax Dollars:

  1. First, you are doing all the work.  All your income comes from you.  Your money can be working for YOU and bringing YOU more value.
  2. After tax dollars that are invested won't get taxed again while the money in retirement accounts will be subject to tax when you take it out and likely at higher tax rates.  Yes the profits from your after tax investments CAN be subject to taxes.
  3. When you decide to open your own business you will need money to get it started.  Having after tax investment money is the ideal source to fund a new business.
  4. You need money set aside for emergencies.  While this should be liquid money it should be working for YOU. 
  5. YOU are the BOSS.  Having after tax money invested empowers you giving you control over your life rather than being a victim.  
  6. You are planning and making things happen.  You have a plan, a budget that includes savings/investing.  So you are not waiting for a miracle, you are making it happen.
  7. You feel good about what you are doing and are making healthy life choices.
Take charge of your life.  Investing after tax dollars will empower you to have more choices and control over your own life choices.  This will cause you to be more lively, more joyful, and to live your life rather than let life dictate terms to you.  Making money working for you will give opportunities to do things for yourself and others.

Investing is for you.  Create another life for yourself, a life of power, impact, and control.  You can do this by putting your after tax dollars to work for you.  Start today.  One measurement that indicates how you are doing is your tax return.  A CPA can prepare a tax return for you but the CPA Superhero will prepare your tax return(s) for you and empower to use what it says to take charge of your life and make more things happen for you.

If you want a CPA Superhero to help you succeed then feel free to contact me using my information below. You can have a free half hour initial consultation.


Jeff Haywood, CPA
The CPA Superhero
972-439-1955
jeff.jhtaxes@gmail.com

Follow the CPA Superhero on Twitter too at:
twitter.com/jeffhaywoodCPA


My posts contain general information that does not fit every situation and is not all inclusive and as always in your tax situation everything "depends on facts and circumstances."  So call me to talk about your specific facts and circumstances and what you want to accomplish.

Thursday, January 16, 2014

Avoid The Four Big Reasons People Fail




What keeps a person from really succeeding?  Let me start with a story.  Legend has it that Chicago Bulls coach Phil Jackson wanted John Paxson to shoot more.  What did Jackson do?  He told Paxson he wanted him to miss at least 3 shots a game.  Jackson wanted Paxson to fail more times per game.  Fear apparently kept Paxson from shooting enough.  Paxson responded to the direction to fail and the Bulls wound up winning 6 NBA Championships.

What about you in your business, where do you need to fail more to succeed?

Fear of failure keeps many from reaching the success that is possible for them. Here are four big reasons people fail and how to avoid them.

1. Giving up too soon.  Most people give up just before they would have succeeded.  Just be determined and when things aren't working adjust, don't give up.

2. Headtrash.  That noise in your head that says I'm not worthy of this success.  Learn to identify this noise and tell it to go away.  Also, don't watch or read things that promote this idea.  Headtrash is often promoted in movies, music, books, etc.  Especially online people complain about things like the government and in reality they are excusing failing and not trying.

3. Fear of Failure.  Not trying!!!  Fear of failure either is a great motivator or a great discourager (my new word).   The really successful go for it in crucial moments and they know they could fail but they go for any way.  Michael Jordan claims he missed 26 game winning shots.  But you probably only remember his 6 championships.  Check out the commercial that was created about his failures as his reason for success.


4. The view of a failure.  Avoid feeling sorry for yourself when something does not turn out like you wanted it to.  Instead view it as succeeding in learning something.  Edison failed over 10,000 times in an attempt to create the light bulb.  How did he view these failures.  He said: "I have not failed. I just found 10,000 ways that won't work".




So go ahead and fail so you can succeed.  Rise above the headtrash and reach your potential.  Aren't you glad Edison did.

If you want a CPA Superhero to help you succeed then feel free to contact me using my information below. You can have a free half hour initial consultation.


Jeff Haywood, CPA
The CPA Superhero
972-439-1955
jeff.jhtaxes@gmail.com


Follow the CPA Superhero on Twitter too at:
twitter.com/jeffhaywoodCPA


My posts contain general information that does not fit every situation and is not all inclusive and as always in your tax situation everything "depends on facts and circumstances."  So call me to talk about your specific facts and circumstances and what you want to accomplish.


Wednesday, January 8, 2014

Tax implications for an LLC?

Should my business be an LLC.  My mechanic told me there are unbelievable tax benefits for an LLC. With all due respect to mechanics, pilots, plumbers, money management bloggers, etc., it is in your best interest to get your information from experts in the field.  When an LLC is recommended for tax purposes realize that the IRS does not have a tax return for an LLC.  There are tax returns for sole proprietors, partnerships, S-Corporations and C-Corporations but none for LLCs.  How can that be?  Since the IRS does not recognize an LLC as a tax entity when you form an LLC you have to choose how that LLC will be treated for Federal income tax purposes.  So you can choose to have your LLC treated as a sole proprietor (if it is a single member LLC), as a partnership (if the LLC has more than one member), as an S-Corporation or C-Corporation.

What tax benefit comes from your business being an LLC depends on the tax status you choose.  What type of tax treatment you should choose for your LLC depends on your situation.  Here I will consider the tax implications of choosing these various entities.


Sole Proprietor:

If you are just starting out in business for yourself you may want to choose to be treated as a sole proprietor.  A sole proprietor is the simplest entity form and typically requires less reporting with the IRS.  A sole proprietor reports his business income and expenses on his personal return typically on a schedule C.  The net income on the schedule C is typically subject to both income taxes and self employment taxes.  Self Employment taxes run about 15% of the net income and are similar to the Social Security and Medicare taxes withheld from an employee.  The only thing is the Social Security and Medicare withheld from an employee's paycheck is typically matched by the employer.  For a self employed individual you are basically paying both halves.


Partnership:

You may be able to choose to have your LLC taxed as a Partnership if the LLC has more than one member.  A Partnership will file it's own separate tax return but in most cases the Partnership is not subject to income taxes but the partners' share of the profits will then be reported on each partner's personal tax return.  In most cases the profits from the partnership will, like a sole proprietorship, be subject to both income taxes and the self-employment tax on the individual partners tax returns if the partner has active participation in the partnership.  So if you actively participate in the partnership the tax situation is similar to a sole proprietor except a separate tax return has to be prepared for the partnership.


S-Corporation:

If you have less than 100 members in your LLC you may be able to elect to have it treated as an S-Corporation.  There can be tax advantages to being treated as an S-Corporation and there is also more responsibility with an S-Corporation.  An S-Corporation will also file a separate tax return and it is not subject to income taxes but each shareholder will then report his share of the profits on his personal income tax return.  In addition an S-Corporation is required to pay its active shareholders a reasonable salary.  So why would you choose to have your LLC treated as an S-Corporation?  The profits after salaries will be reported to the individual shareholders and these profits are reported on their individual returns and subject only to the income tax.  The employment taxes are only paid on the salaries paid to the shareholders.  This can result in a sizable tax savings compared to a sole proprietor or a partnership.  However, in addition to separate tax return for the S-Corporation, there will also be payroll to process and payroll tax returns to file and employment reporting to the state and unemployment taxes at both the state and federal level.  Make no mistake about it, the choice to be treated as an S-Corporation adds a level of complexity.


C-Corporation:

Finally, you may be able to elect to have your LLC treated as a C-Corporation.  The C-Corporation will also be required to file a separate tax return and its profits are subject to income taxes.  The C-Corporation however is not required to pay its shareholders a salary.  However, you can have a double taxation situation with a C-Corporation as eventually the profits have to be paid out to the shareholders as dividends and then they are also taxable to the individual shareholders.

Often C-Corporations are setup for liability protection or some anonymity for the shareholders and a separate S-Corporation is setup as a management company and the profits are run through the S-Corporation to the shareholders.  There are also other complex tax and liability strategies available with different entity combinations.

So should your business be structured as an LLC?  That depends on many factors.  In addition to tax matters you will want to consider your need to protect your personal assets from your business losses and liabilities.  Also, retirement planning can play a significant role in determining which entity or entities are best for you.  It is not unusual for business owners to run their business through more than one entity for protection, tax, and retirement planning purposes.  So consult with your CPA, lawyer and financial planner before you make the very important decision about how to structure your business(es).  Lawyer's tell me they love when you try to form an entity on your own or through a cheap online program because you will eventually wind up paying them handsomely to cleanup the errors.  So don't go the cheap way early on and undermine your ability to achieve great success over time. 

This is a general overview of the tax situation for different entities.  In reality there are various circumstances that can make this very complicate.  Again, it is best to have discussions with your CPA and attorney to get the information you need to make a wise choice for your situation.  This can be a complex tax situation that requires planning and ideally an ongoing knowledge of your situation.  I would be happy to assist you with this as your CPA and discuss different business and tax strategies with you.  Feel free to contact me using the information below.




Jeff Haywood, CPA
The CPA Superhero
972-439-1955
jeff.jhtaxes@gmail.com
The above information is general information and is not all inclusive and as always in your tax situation everything "depends on facts and circumstances."  So call me to talk about your specific facts and circumstances.