Thursday, February 10, 2022

Inflation, Hyperinflation, Deflation. Tax write-off for businesses And Individuals.

 Inflation, Hyperinflation, Deflation Explained By: Visionone Capital Management - - https://www.facebook.com/visiononecapital

Tax write-off for business... 


Inflation, In economics, inflation refers to a general progressive increase in prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.

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The opposite of inflation is deflation, a sustained decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualised percentage change in a general price index.

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Inflation Causes & Effects Explained By: Money Wisers Group - FACEBOOK.COM/MONEYWISERS

Two major types of inflation can lead to an increase in the level of prices. In economics, we refer to these as the demand-pull effect and the cost-push effect.

Demand-Pull Effect

Demand-pull inflation happens when an economy experiences an increased demand for consumer goods. This is inflation driven by consumers. Supply and demand. As demand goes up, prices also go up because buyers are willing to pay more.

When wages go up — like when unemployment is low and employers need to

pay more to attract and retain workers — people have more money to spend on stuff. Their demand increases. Companies raise prices to a level consumers are willing to pay to keep supply and demand in balance.



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Cost-Push Effect

Cost-push inflation happens when prices go up because of a higher cost of production. This is inflation driven by producers.

Cost-push inflation usually happens when wages or the cost of raw

materials goes up. Prices increase because it costs companies more to produce goods.

This is another case of keeping supply and demand in balance.

When the cost of production goes up, supply goes down at current

prices because producers can’t make as much for the same amount of money. Prices increase to ensure producers can afford to keep up with demand.

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Common causes of this kind of strong inflation include:

  • Money Supply. An increase in the money supply — that is, a government literally printing money — can provoke inflation if it outpaces economic growth. When the
    U.S. Federal Reserve (the Fed) puts money into circulation faster than the economy demands it, the value of a dollar goes down. Think of dollars in this case like collector’s items: The rarer they are, the more valuable.


    National Debt. When the national debt is high in relation to how much income a country can generate (GDP)
  • , a government can either raise taxes or print more money to pay it off. Higher taxes mean higher costs for producers, which leads to higher prices. Printing more money increases the money supply and devalues the currency.

  • Exchange Rates. In a global economy, the value of the U.S. dollar compared with international currencies affects prices in the U.S.. When the dollar is less valuable compared with a trade partner’s currency, imported goods cost more to U.S. consumers.

Each of these can happen regardless of consumers’ income. If wages don’t increase, but the money supply, national debt, or exchange rate drives prices up, U.S. consumers become less able to buy stuff, which can stall or slow economic growth.

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Effects of Inflation

Inflation affects the cost of any goods or services in an economy — including major purchases like homes and cars; consumer goods like food and televisions; personal services from construction to health care; and financial services like banking, loans, and credit cards.

Common effects of inflation include:

  • Prices Rise. The most obvious effect of inflation is higher prices on everyday goods and services. That means a higher cost of living, but also generally higher wages.
  • Interest Rates Go Up. To keep inflation from rising out of control, the Fed typically raises the market interest rate to increase the cost of borrowing money and keep from pumping too much money into consumers’ hands and spiking demand and prices.

  • Debt Is Cheaper. If the inflation rate is greater than your interest rate on debt, you benefit by repaying the debt with less-valuable money. In countries that don’t manage interest rates as the U.S. does, debt becomes cheaper with inflation, which can accelerate inflation further.

  • Saving Is Deterred. If the inflation rate is higher than the yield on a savings account or the return on investments, consumers are incentivized to spend now rather than save money that will lose purchasing power over time. Raising interest rates in the U.S. helps savings keep up with inflation to avoid this dilemma.

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Hyperinflation Explaing By:
 Visionone Holding Company -
Hyperinflation...
In economics, hyperinflation is very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase.
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Hyperinflation: Its Causes and Effects Explained By: Femkonsa Capital Investment -
Causes of Hyperinflation
Hyperinflation has two main causes: an increase in the money supply and demand-pull inflation. The former happens when a country's government begins printing money to pay for its spending. As it increases the money supply, prices rise as in regular inflation.

The other cause, demand-pull inflation, occurs when a surge in demand outstrips supply, sending prices higher. This can happen due to increased consumer spending due to a growing economy, a sudden rise in exports, or more government spending.
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Effects of Hyperinflation Explained By: Fruital Investment Group - ...
When hyperinflation is in effect, consumer behavior adjusts. To keep from paying more for goods tomorrow, people begin hoarding today.

That stockpiling creates shortages. Hoarding can start with durable goods, such as automobiles and washing machines. If hyperinflation continues, people hoard perishable goods, like bread and milk.
These daily supplies become scarce, and more expensive, and the economy falls apart.
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Hyperinflation sends the value of the currency plummeting in foreign exchange markets. The nation's importers go out of business as the cost of foreign goods skyrockets. Unemployment rises as companies fold.
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There are two winners in hyperinflation. The first beneficiaries are those who took out loans and find that the collapsing value of the currency makes their debt worthless by comparison until it is virtually wiped out.
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Second, Exporters are also winners because the falling value of the local currency makes exports cheaper compared to foreign competitors. Additionally, exporters receive hard foreign currency, which increases in value as the local currency falls.
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REMEMBER, Hyperinflation in Weimar Germany
The most well-known example of hyperinflation was during the Weimar Republic in Germany in the 1920s. Through World War I, the amount of German paper marks increased by a factor of four.

By the end of 1923, it had increased by billions of times. From the outbreak of the war until November 1923, the German Reichsbank issued 92.8 quintillion paper marks. In that period, the value of the mark fell from about four to the dollar to one trillion to the dollar.34

At first, this fiscal stimulus lowered the cost of exports and increased economic growth.

When the war ended, the Allies saddled Germany with another 132 billion marks in war reparations. Production collapsed, leading to a shortage of goods, especially food.


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REMEMBER, Hyperinflation in Venezuela
The most recent example of hyperinflation is in Venezuela. Prices rose 41% in 2013, and by 2018 inflation was at 65,000%.6 In 2017, the government increased the money supply by 14%.7 It is promoting a new cryptocurrency, the "Petro," because the bolivar lost almost all its value against the U.S. dollar.

Unemployment rose to over 20%, similar to the U.S. rate during the Great Depression.

How did Venezuela find itself in such a mess? Former President Hugo Chávez had instituted price controls for food and medicine. But mandated prices were so low it forced domestic companies out of business.

In response, the government paid for imports. In 2014, oil prices plummeted, eroding revenues to the government-owned oil companies. When the government ran out of cash, it started printing more.

As of 2016, Venezuela’s foreign debt was about $100 billion.

The annual inflation rate for consumer prices was at 2,300% percent in early 2020.
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REMEMBER, Hyperinflation in Zimbabwe
Zimbabwe experienced hyperinflation between 2004 and 2009. The government printed money to pay for the war in the Congo. Also, droughts and farm confiscation restricted the supply of food and other locally produced goods.

As a result, hyperinflation was worse than in Germany. The inflation rate was 98% a day, and prices doubled every 24 hours.13

It finally ended when the country retired its currency and replaced it with a system that used multiple foreign currencies, predominantly the U.S. dollar.
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Deflation Explained By: Buyheremarket Enterprise -
Deflation... In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation increases it.

This allows more goods and services to be bought than before with the same amount of currency. Deflation is distinct from disinflation, a slow-down in the inflation rate, i.e. when inflation declines to a lower rate but is still positive.
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Deflation is the general decline of the price level of goods and services. Deflation is usually associated with a contraction in the supply of money and credit, but prices can also fall due to...

Deflation is the general decline of the price level of goods and services.
Deflation is usually associated with a contraction in the supply of money and credit, but prices can also fall due to increased productivity and technological improvements.

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Tax write-off for business..
Tax write offs are eligible expenses that you can use to deduct from your income 
when filing your business taxes.

How to pay yourself as an llc single member..
Having an ein numer allows you to open a business bank account and to apply for a business loan e.i.n = employer identification number 
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Distribution is to pay yourself - when you pay employees  you receive deduction but not yourself.
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As an llc the best way to pay yourself is by owner distribution. you are simply transferring money from your business account into your personal account.

Whether by writing  a check or wire the fund directly to your account.
as the owner of a corporation, you are a shareholder, not an employee. no w2 wages.
technically, llc's are pass-through entities.
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Generally, you are responsible to pay federal income tax, state income taxes, and self-employment taxes
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Pretty much for any business; cash is the lifelive of a business.
cash is the blood and heartbeat of a business 
the shorter the distance they can go. 90% of business fail because of shortage of cash.

In business it's good to have in hand at least 3 months of operating expenses for unexpected.
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As a business person, you should set money aside to reach strategic business goals.
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Business tax write-offs...
Start up organizational costs, you are entitle to $5000 for llc's tax write offs.
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Home office deduction for a designated space, or a room in your home strictly for business - home office expenses write-offs.
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Business vehicle deduction: 
2 different ways to vehicle deduction... #1- by mileage, about or over 50 cents per mile you drive .

#2- By depreciating the vehicle . vehicle depreciates over the course of 5 years
or by straight line depreciation

Another way is by double declining. code section 179 allows you to deduct.
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 marketing and advertisement are two of the biggest expenses in business - business expense deduction.
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Turning an llc's into an s corp, you will eliminate 15.3% self-employment tax.
An s corp requires  owners to pay themselves.

You can choose to tax yourself as an llc or as an s corp.
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More ways to write-off tax in your business...
Every year over 2 million tax-payers overpay in taxes, about or over one billion dollar.

Business meal, you can write off up to 50% of your business income
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Business interest expenses write off: 
when your business has debt and you're paying interest on that debt .
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Tax write off - retirement contribution for myself and for my employees for qualified plan.
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Tax write off - health saving account contribution - health saving account 
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Self-employment taxes, shareholders of s corp do not pay self-employment taxes.
However, you are required to pay yourself a salary which are subject to taxes.
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Pass-through tax deduction, you can write off up to 20% of the business income.

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Individual tax write-offs
Student loan interest deduction. - Standard deduction... free - bies
Itemize deduction: - Mortgage interest deduction

The irs allows deduction up to $10000 in state tax deductions
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Medical and dental expense deduction.
On medical and dental expenses that exceed 7.5% of 100.000 dollars
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Property tax deduction 
Property taxes and local taxes are called: salt = state and local taxes . irs allows to deduct up to $10.000 in combination
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Charitable contribution can be deductible
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Wednesday, February 2, 2022

Tax Deductions Guide - Tax Write-Offs Not to Overlook - Income Tax Credits -

Tax Information for Individuals And Businesses - Maximize your tax deductions and credits. with the help of: visionone capital management


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  • The IRS recognizes five filing statuses on the Form 1040: single, married filing jointly, married filing separately, head of household and qualifying widow(er).

    If you’re married, you and your spouse have the option of filing one federal income tax return.

    Joint filers report their income, deductions and credits on the same federal return — even if only one spouse had income in the tax year. Both spouses will also list dependents on that joint return, both Social Security numbers will appear on the return, and both must sign it to use the joint status.

    Married taxpayers may also choose to file separate tax rules for the married filing separately status are different from married filing jointly rules

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  • -----------

  • -----The married filing jointly status typically gives married couples the highest standard deduction, the lowest tax bill and more tax breaks than if they file separately. The downside? Both spouses are liable for taxes owed on a joint return, even if one didn’t earn any income. And in some cases, it might make sense to file separate returns.



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    • TAXES, ALL ABOUT INCOME TAX...
      Understand tax-filing fundamentals, from due dates to itemized deductions. www.knowledgefinancialgroup.com
      Failing to file will cost you more than failing to pay your taxes. ...
      Refunds are forfeited after three years. ...
      There are plenty of ways to reduce your taxable income this year. ...
      Taxes should be part of every retirement planning discussion.
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      TAXES: Things Everyone Must Know About Taxes...
      Filing taxes can feel daunting, regardless of your income bracket, filing status or familiarity with current rules and regulations..
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      Taxes: important documents prepped and learning basic concepts, including how taxes are assessed and collected, can help make the process easier to navigate.
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      Failing to file will cost you more than failing to pay your taxes. "You need to file your return on time," www.moneywisers.blogspot.com
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      People may be hesitant to file if they can't pay their bill, but you can always request a payment plan. What's more, the penalty for failing to file is significantly more than the penalty for failing to pay.
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      Refunds are forfeited after three years. Some people don't bother filing their federal return because they are short on time and know the government owes them money.
      While there is no failure-to-file penalty on returns that are due a refund, procrastinating can still cost you. If you wait too long, you won't be able to claim the refund at all. www.knowledgefinancialgroup.com/institute
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      You may not need to itemize your deductions. Taxpayers of all filing statuses will see their standard deductions nearly double when they file returns next year, thanks to the Tax Cuts and Jobs Act. The law increases the standard deduction for married couples filing jointly.
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      People can still get a tax break for charitable contributions through. One way is for retirees to direct a portion of their required minimum distribution, known as an RMD, to a nonprofit organization.
      When seniors turn age 70 ½, they are required to take an RMD from traditional IRA and 401(k) accounts, even if they don't need the money. www.knowledgefinancialgroup.com/incometax
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      Taxes should be part of every retirement planning discussion. Part of planning for retirement should be planning for taxes. Some money, such as funds from traditional retirement accounts, is taxable in retirement.
      However, cash from Roth accounts can be withdrawn tax-free. Meanwhile, Social Security benefits can be partially taxed once an individual reaches $25,000 in combined income or a couple has $32,000 in combined income. www.knowledgefinancialgroup.com/TAXES
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      Tax professionals can help navigate complex situations. Don't leave money on the table. Make sure you've claimed all possible deductions by using a CPA or professional tax preparer. This may be especially important for those with investments or business owners. www.knowledgefinancialgroup.com/NEWS-LETTER


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  • Head of Household vs Single...

  • The key difference between single and head of household is that Single is a tax filing status for unmarried people who do not qualify for another filing status while Head of Household is an IRS tax filing status for single people who have a qualifying child or relative living with them, and pay more than half the costs of their home.

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  • Your Guide to Filing Head of Household vs. Single...

  • When you file your tax return, it’s important to know your correct filing status because it can affect the amount of tax you owe for that year. The Internal Revenue Service advises that your marital status on December 31 of the previous calendar year is your tax filing status for that entire year.

    Sometimes more than one tax filing status may apply to you for a given year. If you are single, meaning not married on December 31, your filing status could be either single or head of household: single if you have no dependents, and head of household if you have qualifying dependents.

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  • What Qualifies You As Head of Household Filing Status?

    Head of household status applies to taxpayers who are not married, but some specific rules are involved. You must meet certain criteria to qualify as head of household. You can use a head of household calculator such as eFile’s HOHucator Tool to determine if you meet these requirements. You must:

    • Have a qualifying child or dependent
    • Be unmarried on December 31 of the filing tax year
    • Have paid for more than half of the household expenses for the tax filing year.
      • At end of the tax year, must be under age 19 if not a student; under 24 if a full-time college student
      • Must be biological, adopted, step, or foster child; sibling, step sibling, half sibling, or descendant of one of these relatives
      • Must not have paid for more than half of their living expenses during the tax year
      • Must have lived in your home for more than six months during the tax year

      Qualifying Dependent

      • Your parent: mother or father
      • Your stepparent, niece, nephew, aunt or uncle of one of your parents, son-in-law, daughter-in-law, father-in-law, brother-in-law or sister-in-law
      • Your biological, adopted, step, or foster child; sibling, step, half sibling, or disabled descendant of one of these relatives
      • Tax Advantages of Filing as Head of Household

        As a result of filing as head of household, single and separated taxpayers can potentially save thousands of dollars. Compared to single and married filing separately, head of household filing status has a larger standard deduction.

      • Under certain circumstances, you can file as head of household even if you do not have any children. For instance, you can claim a live-in partner as a qualifying relative or dependent if they meet all of the following IRS rules.

        • They are not someone else’s qualifying child.
        • They lived with you for the entire tax filing year.
        • Their income is less than $4,300.
        • You provided more than half of the household expenses during the entire tax filing year.

        Since you are supporting at least one person besides yourself, filing head of household has the advantage of lowering your tax liability just as those who are married filing jointly. 


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      • Child tax credit

        A child tax credit is a tax credit for parents with dependent children given by various countries. The credit is often linked to the number of dependent children a taxpayer has and sometimes the taxpayer's income level. For example, in the 
      • United States, only families making less than $400,000 per year may claim the full CTC
      • Essential legal documents you may need soon...

        http://www.knowledgefinancialgroup.com/financialplanning.html

        You never know when you might need a will, or an advance health care directive. Illness, disability, or death can strike at any-time.You've just to prepare in advance. 

        http://www.knowledgefinancialgroup.com/retirementplanning

        This documents will help ensure that your assets go to the right people, your wishes be respected and your medical care will be honored the way you expected it to be.

      • http://www.knowledgefinancialgroup.com/PENSION-PLANS

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Child Tax Credit

The American Rescue Plan’s expansion of the Child Tax Credit will substantially reduce child poverty by (1) supplementing the earnings of families receiving the tax credit, and (2) making the credit available to a significant number of new families. Specifically, the Child Tax Credit has been revised in the following ways for 2021:

  • The credit amount has been increased. The American Rescue Plan increased the amount of the Child Tax Credit from $2,000 to $3,600 for qualifying children under age 6, and $3,000 for other qualifying children under age 18.
  • The credit is now fully refundable. By making the Child Tax Credit fully refundable, low- income households will be entitled to receive the full credit benefit, as significantly expanded and increased by the American Rescue Plan.
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  • Use a Site

    The IRS Volunteer Income Tax As

     Free Tax Return Preparation

  • sistance (VITA) and the Tax Counseling for the Elderly (TCE) programs offer free tax help and e-file for taxpayers who qualify.

  • The IRS's Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs offer free basic tax return preparation to qualified individuals.

    The VITA program has operated for over 50 years. VITA sites offer free tax help to people who need assistance in preparing their own tax returns, including:

    • People who generally make $57,000 or less
    • Persons with disabilities; and
    • Limited English-speaking taxpayers

    In addition to VITA, the TCE program offers free tax help, particularly for those who are 60 years of age and older, specializing in questions about pensions and retirement-related issues unique to seniors.

    While the IRS manages the VITA and TCE programs, the VITA/TCE sites are operated by IRS partners and staffed by volunteers who want to make a difference in their communities. The IRS-certified volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS.

    VITA/TCE services are not only free, they are also a reliable and trusted source for preparing tax returns. All VITA/TCE volunteers who prepare returns must take and pass tax law training that meets or exceeds IRS standards. This training includes maintaining the privacy and confidentiality of all taxpayer information. In addition to requiring volunteers to certify their knowledge of the tax laws.

  • What to Bring to Your Local VITA or TCE Site

    • Proof of identification (photo ID)

    • Social Security cards for you, your spouse and dependents 

    • An Individual Taxpayer Identification Number (ITIN) assignment letter may be substituted for you, your spouse and your dependents if you do not have a Social Security number

    • Proof of foreign status, if applying for an ITIN

    • Birth dates for you, your spouse and dependents on the tax return

    • Wage and earning statements (Form W-2, W-2G, 1099-R,1099-Misc) from all employers

    • Interest and dividend statements from banks (Forms 1099)

    • Health Insurance Exemption Certificate, if received

    • A copy of last year’s federal and state returns, if available

    • Proof of bank account routing and account numbers for direct deposit such as a blank check

    • To file taxes electronically on a married-filing-joint tax return, both spouses must be present to sign the required forms

    • Total paid for daycare provider and the daycare provider's tax identifying number such as their Social Security number or business Employer Identification Number

    • Forms 1095-A, B and C, Health Coverage Statements

    • Copies of income transcripts from IRS and state, if applicable

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    • Signing the Return

      For signing an electronic return see Validating Your Electronically Filed Tax Return.

      For signing a paper tax return:

      • If you file a joint return, both spouses must sign the return. If your spouse cannot sign because of a medical condition and requests that you sign the return, sign your spouse's name in the proper place, followed by the word "by" then your signature, followed by the word "husband" or "wife." Be sure to also sign in the regular space provided for your signature.

      •  Attach a statement that includes the form number of the return you're filing, the tax year, the reason your spouse cannot sign the return, and that your spouse has agreed to your signing for him or her. If you're the guardian for your spouse who is mentally incompetent, you may sign the return for your spouse as "guardian."

      • If your spouse cannot sign the return for any other reason, you may only sign it if you have a valid power of attorney. You should attach the document granting you power of attorney to the return. You may use Form 2848, Power of Attorney and Declaration of Representative (PDF) for this purpose.
      • If you're filing a return for a minor child who cannot sign the return, sign the child's name followed by the word "by," your signature, and your relationship, such as "parent" or "guardian for minor child.
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  • Tax Treatment of Unemployment Compensation...

  • In most cases, if you already filed a tax return that includes the full amount of your unemployment compensation, the IRS will automatically determine the correct taxable amount of unemployment compensation and the correct tax. If you paid more than the correct tax amount, the IRS will either refund the overpayment or apply it to other outstanding taxes owed.
  • Unemployment compensation is taxable. However, the American Rescue Plan Act of 2021 allows an exclusion of unemployment compensation of up to $10,200 for individuals for taxable year 2020. In the case of married individuals filing a joint Form 1040 or 1040-SR, this exclusion is up to $10,200 per spouse. To qualify for this exclusion, your adjusted gross income (AGI) must be less than $150,000. This threshold applies to all filing statuses and it doesn't double to $300,000 if you are married and file a joint return..
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  • Earned Income Tax Credit

    The United States federal earned income tax credit or earned income credit (EITC or EIC) is a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children. The amount of EITC benefit depends on a recipient's income and number of children. For a person or couple to claim one or more persons as their qualifying child, requirements such as relationship, age, and shared residency must be met
  • What Is the Earned Income Tax Credit?

  • The earned income tax credit (EITC) is a refundable tax credit designed to provide relief for low-to-moderate-income working people.
  • How Do Earned Income Tax Credits Work?

    If you qualify for the EITC, you can apply the credit directly toward your tax bill. For example, if you owe the U.S. government $2,300 in taxes for 2020 and you qualify for an EITC of $3,584, the U.S. government owes you $1,284. Because the EITC is a refundable tax credit, you can receive this money as a tax refund.

    Income eligibility for the EITC is based on your adjusted gross income and your earned income. Adjusted gross income is all the money you made in a year minus specific deductions and credits. Earned income includes:

    • Wages, salaries and tips
    • Pay received for gig work or contracting
    • Union strike benefits - Nontaxable combat pay
    • Certain disability benefits received before you reach minimum retirement age - Net earnings from self-employment

    Other types of income are not considered earned. These include:

    • Interest and dividends - Retirement income - Social security
    • Unemployment benefits - Alimony - Child support
    • Pay received for work while in prison

    How Do I Qualify for the Earned Income Credit?

    EITC rules vary depending on your filing status and family size. Here are the basics.

    For All Taxpayers

    • Your earned income and adjusted gross income must be within defined limits (see table below).
    • Your investment income cannot exceed $3,650.
    • If married, you and your spouse file jointly, not separately.
    • You and your spouse have valid Social Security numbers.
    • You were a U.S. citizen or resident alien for the full tax year.
    • You have not filed Form 2555 (related to foreign income).

    For Single Taxpayers

    If you don't have children—or don't have "qualifying children" as described below—you must meet these additional requirements:

    • Be older than 25 but younger than 65 at the end of the tax year.
    • Live in the United States for more than half the year.
    • Not be the dependent or "qualified child" of another taxpayer.
    • REITs vs. REIT ETFs: How They Compare...
      Learn about the difference in investing in a REIT for a single real estate cREITs vs. REIT ETFs: An Overview
      Real estate investment trusts (REITs) are companies that own and operate real estate to produce and generate income. Investors can purchase shares in REITs—which represent ownership of an individual real estate company—just like regular stocks. The individual performance of REITs can vary widely. Many REITs are traded on major stock exchanges, but there are also a number of private and non-publicly traded REITs. = http://www.knowledgefinancialgroup.com/Real-Estate.html
      -----------------
      REIT exchange-traded funds (ETFs), on the other hand, invest their assets primarily in equity REIT securities and other derivatives. They often have low expense ratios and passively track indexes for the larger real estate market.2 These REIT indexes include a number of different types of REITs as components. By tracking an index, an investor can gain exposure to the larger real estate sector without having to risk capital on one individual company.


    What Is a "Qualifying Child?"

    For the purposes of the EITC, your "child" does not have to be your biological child. Rather, they must live with you in the U.S. for more than half the year, and have one of the following qualifying relationships with you:

    • Son or daughter - Stepchild - Legally adopted child - Foster child
    • Sibling (step, half or whole) - A descendant of any of the above

    Your qualifying child must also be younger than you are and under the age of 19 at the end of the tax year—24 if they are a full-time student. A child who is permanently and totally disabled can be any age.

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  • What Is Capital Gains Tax?

  • The capital gains tax is a tax you may have to pay if you sell a capital asset for a profit. Capital assets could include stocks, bonds, property, vehicles, collectibles, antiques, cryptocurrencies and businesses. The capital gains tax rate is lower than many people's ordinary income tax rate, which may be an incentive to make long-term investments.
  • What Is Capital Gains Tax?

    The capital gains tax only applies to profits from capital assets when you actually realize a gain, not when an asset simply rises in value.

    For example, if you buy a stock for $100 and its value increases to $250, you have $150 in unrealized gains. You don't have to pay taxes on the stock's increased value because you haven't made any money yet—the stock might even drop in value before you sell it.

    Capital gains and losses are realized when the asset is sold. If you sell an asset for more than you bought it for, you could then have to pay capital gains taxes on the difference

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  • Short-Term Capital Gains Tax Rates...

    If you purchase an asset and then sell it within a year, you have to use the short-term capital gains tax rate—which is the same as the tax rate charged on your ordinary income.

  • -----------

  • Long-Term Capital Gains Tax Rates'' 

    The long-term capital gains rate also depends on your filing status and taxable income. For many people, the long-term capital gains tax rate will be lower than their short-term tax rates.

  • -------------
  • Adjusted Gross Income ...

  • You want to see if you can deduct a retirement contribution or submit your income on a mortgage application, and the term adjusted gross income (AGI) pops up. What is it? Although you may know your annual salary or weekly unemployment benefit amount offhand, AGI is another thing altogether.

    AGI is common shorthand for your overall income. It's calculated as part of your tax return and often used on loan, credit or government benefit applications.

  • What Is Adjusted Gross Income?

    AGI is your gross—or total—income minus a few "adjustments." Gross income includes wages, dividends, capital gains, business income, retirement distributions and additional items like tips, rental property income and unemployment benefits. Adjustments include educator expenses, student loan interest, alimony you've paid or contributions you've made to a retirement account.

    To distinguish between three types of income you may be asked about:

    • Gross income is all income that is not specifically tax-exempt.
    • Adjusted gross income subtracts "above the line" adjustments like student loan interest and retirement contributions.
    • Taxable income is AGI minus standard or additional itemized deductions.

    What Is AGI Used for?

    AGI is one of the key metrics that determine how much income tax you owe, both at the state and federal levels. Once you calculate your AGI, you're ready to take your allowable deductions and exemptions and figure out how much tax you owe.

    The IRS also requires you to enter your prior year's AGI when you e-file if you've prepared your own taxes. You'll find your AGI on last year's IRS Form 1040, line 8B.

    AGI is the figure lenders are looking for when they ask for your income on a mortgage application. Your AGI provides insight into multiple sources of income, not just your wages. This helps your lender get a clearer picture of how large a loan payment you can afford each month, based on all of your monthly income. Your AGI is also relatively easy for a lender to verify by reviewing your past tax returns.

    Applying for financial aid? AGI is the income used for the Free Application for Federal Student Aid (FAFSA). Overall, it's never a bad idea to clarify what a credit card company, lender or even the IRS means when they ask you for income information. But, more often than not, your AGI is the number they're looking for.

  • --------------------

  • How the Child and Dependent Care Credit Can Save You Money...

  • If you're paying for child care while you work or look for work, you may be able to claim a tax credit to offset some of those expenses.

    The Child and Dependent Care Credit allows workers to claim work-related care expenses for qualifying dependents on their taxes.

  • What Is the Child and Dependent Care Credit?

    The Child and Dependent Care Credit is a tax credit designed for working people who pay care expenses for children or other dependents while working or actively seeking work. People who care for children, a disabled dependent or a disabled spouse may be able to claim it.

    The Child and Dependent Care Credit is different from the child tax credit, which is designed to benefit all parents and guardians of children. The Child and Dependent Tax Credit provides relief for workers who must pay someone to care for their dependent while they're working or looking for work.

    The credit compensates you for a percentage of what you spend on work-related dependent care, and the rate you're eligible for is based on your income. Unlike a deduction, which reduces your taxable income, a credit directly reduces your tax bill, dollar-for-dollar.

    So, for example, if you're eligible for a $4,000 tax credit, that cuts your tax bill by $4,000 directly. To put that in perspective, a $4,000 deduction would only save you $800 if you're in the 22% income tax bracket.

    The  American Rescue Plan, created to provide relief for households affected by the COVID-19 pandemic, increased the amount of work-related expenses you can claim as part of the credit (see more below). 

  • Eligibility Criteria

    To help you determine if you qualify, the IRS lists the following eligibility tests in Publication 503:

    • Qualifying person test: To qualify you for the credit, the care must have been provided to a dependent under age 13 or a spouse or other dependent who is physically or mentally unable to care for themselves.
    • Earned income test: You need to have earned income during the year to qualify. If you're married and filing jointly, your spouse must also have earned income.
    • Work-related expense test: You must have paid for care specifically so you could work or actively look for work. For example, paying for after-school care or day camp in the summer might qualify as a work-related expense, but paying for private kindergarten or overnight camp would not.
      • Joint return test: How you file your taxes determines your eligibility. If you're married you must file jointly to qualify, although there are exceptions for spouses who are legally separated.
      • Provider identification test: You'll need to provide taxpayer identification information for your care provider, which may be a Social Security number or Employer Identification Number.
      • How to Claim the Child and Dependent Care Credit

        Claiming the Child and Dependent Care Credit is straightforward. You'll need to complete Form 2441, Child and Dependent Care Expenses, and include it when you file your federal income taxes. The form helps determine your eligibility and credit amount.

        To complete the form, you'll need to provide details such as your care provider's tax ID, your dependent's Social Security number, your income and the sum of your eligible care expenses. The form includes a worksheet to help you calculate this figure.

      • ======================

        • Tax Credits and Tax Deductions for Individuals...

        • How Tax Credits and Tax Deductions Work?

          When you claim federal tax credits and deductions on your tax return,  you can change the amount of tax you owe.

          • Deductions can reduce the amount of your income before you calculate the tax you owe.
          • Credits can reduce the amount of tax you owe or increase your tax refund, and some credits may give you a refund even if you don't owe any tax..
          • -------------------------------------------
          •  Tax Write-Offs Not to Overlook for this year.
          • As a small business owner, many of your expenses may be deductible
          • You likely know a few things you can write off, but there are probably  more savings opportunities than you realize.
            • 1. Business Casualty Losses. Perhaps the most noteworthy deduction  to take note of this year is business casualty loss. If your commercial property .
            • { Small Business Tax Deductions }

            • What exactly is a tax deduction?

              A tax deduction (or “tax write-off”) is an expense that you can deduct from your taxable income. You take the amount of the expense and subtract that from your taxable income. Essentially, tax write-offs allow you to pay a smaller tax bill. But the expense has to fit the IRS criteria of a tax deduction. REAL ESTATE INVESTING 101: http://knowledgefinancialgroup.com/Real-Estate

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            • Business insurance

              You can deduct the premiums you pay for business insurance.

              This may include:

              • Property coverage for your furniture, equipment, and buildings - Liability coverage
              • Group health, dental and vision insurance for employees
              • Professional liability or malpractice insurance
              • Workers compensation coverage
              • Auto insurance for business vehicles
              • Life insurance that covers employees, as long as the business or business owner is not a beneficiary on the policy
              • Business interruption insurance that covers lost profits if your business is shut down due to fire or another cause
            • Business Casualty Losses

              Perhaps the most noteworthy deduction to take note of this year is business casualty loss. If your commercial property experienced damage or theft resulting from a federally declared disaster, you could deduct up to 100% of those losses. Natural disasters, vandalism, and civil disturbances, all of which have been prevalent recently, qualify..
            • 2. Phone and Internet Expenses.
            • Phone and Internet Expenses

              One expense you can certainly write off this year is your business’s phone and internet costs. If your business relies on phone and internet services, you can deduct their cost. Since so many companies have embraced remote work in the past year, that now applies to far more people.

            • 3. Salaries and Benefits.

            • Salaries and Benefits

              As a small business, employee salaries and benefits likely constitute a large portion of your expenses. Thankfully, you can write these off on your tax return to mitigate their financial impact. This deduction covers everything from regular wages to commissions to bonuses and even vacation time.

              You should be aware that there are some stipulations to deducting salaries and benefits. You can only write off payments to employees who aren’t partners, sole proprietors, or LLC members.

            • Charitable Contributions

              The past year or so has been challenging for many people, so you might’ve contributed to charity to help out. If you’ve made these donations under your business’s name, you may be able to deduct them. While these deductions are more limited for companies than individuals, you can still benefit from them as a business.

              Your charitable gifts must be cash, fall under the current tax year, and benefit a qualified organization to qualify for the deduction. The IRS has a charitable organization search tool you can use to make sure your donations qualify. These typically include things like religious, civil defense, and war veterans’ organizations.

            • Business use of your car

              Do you use your vehicle for business? If you use your vehicle solely for business purposes, then you can deduct the entire cost of operating the vehicle. If you use it for both business and personal trips, you can only deduct the costs associated with business-related usage.

              There are two methods for deducting vehicle expenses, and you can choose whichever one gives you a greater tax benefit.

              • Standard mileage rate. Multiply the miles driven for business during the year by a standard mileage rate. For miles driven in 2020, the standard mileage deduction is $0.57½ per mile. In 2021, it is $0.56 per mile.

              • Actual expense method. Track all of the costs of operating the vehicle for the year, including gas, oil, repairs, tires, insurance, registration fees, and lease payments. Multiply those expenses by the percentage of miles driven for business.

              Both methods require that you track your business miles for the year. You can keep a detailed log of your business miles, use an app to track your trips, or reconstruct a mileage log using other documents, such as calendars or appointment books. If you keep a mileage log, clearly document the miles driven, time and place, and business purpose of your trip. 
            • -----------

               Interest

              Many business owners have to take out loans to cover operating or startup expenses. Given the widespread financial hardships of the past year, these situations are more likely this tax season. If you’ve taken out a business-related loan this tax year, you can deduct the interest you’ve paid on it.

              Interest from credit card payments also falls under this category. As long as you are legally liable for the debt, have a genuine debtor-creditor relationship, and the loan isn’t a gift, you can deduct the interest. You should also note that capitalized interest, like that added to a mortgage’s principal balance, doesn’t count.

              You may have a loan or credit card payment that is part business and part personal. If that’s the case, you can write off the business portion, but not the entire amount.

            --6. -------------

            Home Office Expenses

            Another relevant tax write-off for 2021 is home office expenses. At the end of 2020, 41.8% of American workers worked remotely, and 26.7% expect to still do so by 2021. If you’re in that group, you can deduct expenses related to maintaining your home office.

            Home office expenses include things like rent, utilities, designated phone lines, home repairs, and housekeeping services. You can’t deduct the entire cost of these expenses, but you can write off however much goes towards your work. You also have to use part of your home regularly and exclusively for work for it to count as a home office.

            There are two ways to calculate the total here. With the simplified method, you deduct $5 for every square foot of your home used for business, up to $1,500. The standard method involves adding all the relevant expenses then multiplying them by the percentage of your home you use for work.

          • -------------

          • Depreciation

            When you purchase furniture, equipment, and other business assets, depreciation rules require you to spread the costs of those assets over the years you’ll use them rather than deducting the full cost in a single hit.

            Expensing these items upfront is more attractive because of the quicker tax benefit. Fortunately, the IRS gives business owners several ways to write off the full cost in one year.

            • De minimis safe harbor election. Small businesses can elect to expense assets that cost less than $2,500 per item in the year they are purchased. You can read more about the de minimis safe harbor election in this IRS FAQ.

            • Section 179 deduction. The Section 179 deduction allows business owners to deduct up to $1,040,000 of property placed in service during the tax year. This includes new and used business property and “off-the-shelf” software. The Section 179 deduction is limited to the business’s taxable income, so claiming it cannot create a net loss on your return. However, any unused Section 179 deduction can be carried forward and deducted on next year’s return.

            • Bonus depreciation. Businesses can take advantage of bonus depreciation to deduct 100% of the cost of machinery, equipment, computers, appliances, and furniture.

            • ----------

            Advertising and Promotion

            You’ve most likely engaged in some form of marketing in the past year. On average, marketing accounts for 11.7% of overall company budgets, and in some sectors, it’s close to 20%. That’s a considerable amount of money going to advertising and promotion. As a small business, you can deduct all of it.

            Any money you spend on campaigns to get new customers or retain current ones is eligible for deduction. That includes printing costs, influencer marketing, social media ads, and hiring freelancers like graphic designers. Sponsorships also count unless they’re sponsoring a political candidate, party, or event.

          • --------

          • 8. Business Insurance

            Another often-overlooked tax write-off for small businesses is business insurance. State laws and industry standards often require some amount of insurance, so this is likely an expense you have. If these services are ordinary and necessary for your company, they are 100% deductible.

            Common examples of deductible insurance include property coverage, liability coverage, employee health plans, workers’ compensation, and auto insurance for company vehicles. As cybercrime becomes more prominent, you may be able to write off data breach insurance. If you can make a reasonable argument that it’s necessary and ordinary, you can deduct it. = Your specific policy may matter, too.

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          • Education

            You may offer educational benefits to your employees to encourage professional development. If so, you can write off the costs of providing these programs and resources. Employers spend $1,308 per employee on average on learning and development so that these deductions can be substantial.

            Deductible educational expenses include classes and workshops, seminars, and professional publication subscriptions. If you cover the cost of transportation to and from classes, those costs are also deductible. Keep in mind that all of this refers to continued professional development programs, and not minimum education requirements.

            To qualify for this deduction, your employee education costs must maintain or improve required skills in your business. Courses that aren’t relevant or that would qualify employees for a different career aren’t eligible.

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        • ------------
          • Tax Credits & Tax Deductions for Businesses...

             
          • Make the Most of Your Taxes This Year

            No matter what your company’s budget looks like, you can find areas to write off for your this year taxes.

          • Life insurance coverage.

             

            You can't deduct the cost of life insurance coverage for you, an employee, or any person with a financial interest in your business if you’re directly or indirectly the beneficiary of the policy..


          • -------

          • Sick and Vacation Pay

            Sick pay.

             

            You can deduct amounts you pay to your employees for sickness and injury, including lump-sum amounts, as wages.

          • --------

          • Rent

            Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business.

          • --------

          • Rent on your home.

             If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part.

          • ---------

          • Education

            Education costs are fully deductible when they add value to your business and increase your expertise. In order to decide if your class or workshop qualifies, the IRS will look at whether the expense maintains or improves skills that are required in your current business.

            The following list contains examples of valid business education expenses:

            • Classes to improve skills in your field
            • Seminars and webinars
            • Subscriptions to trade or professional publications
            • Books tailored to your industry
            • Workshops to increase your expertise and skills
            • Transportation expenses to and from classes

            Keep in mind that any education costs that would qualify you for a new career, or costs related to education outside of the realm of your business, don’t qualify as business tax deductions.

        • ----------------
          • How To Claim a Business Bad Debt

            There are two methods to claim a business bad debt.

            • The specific charge-off method.

            • The nonaccrual-experience method.

            Generally, you must use the specific charge-off method. 

          • ---------- 


          • Reimbursement of Travel and Non-Entertainment Related Meals

            The following discussion explains how to handle any reimbursements or allowances you may provide to your employees under a reimbursement or allowance arrangement for travel and non-entertainment related meals expenses.

          • -------

          • How you deduct a business expense under a reimbursement or allowance arrangement depends on whether you have:

            • An accountable plan, or 

              A nonaccountable plan.

            If you reimburse these expenses under an accountable plan, deduct them as travel and non-entertainment related meals expenses.

            If you reimburse these expenses under a nonaccountable plan, report the reimbursements as wages on Form W-2, and deduct them as wages on the appropriate line of your tax return.

          • ------------

          • Per Diem and Car Allowances

            You can reimburse your employees under an accountable plan based on travel days, miles, or some other fixed allowance. In these cases, your employee is considered to have accounted to you for the amount of the expense that doesn’t exceed the rates established by the federal government.

          • Federal rate.

             

            The federal rate can be figured using any one of the following methods.

            1. For car expenses:

              1. The standard mileage rate.

              2. A fixed and variable rate (FAVR).

            2. For per diem amounts:

              1. The regular federal per diem rate.

              2. The standard meal allowance.

              3. The high-low rate.

              4. ---------

              5. Car allowance.

                 

                Your employee is considered to have accounted to you for car expenses that don’t exceed the standard mileage rate. 

              6. For tax year 2020, the standard business mileage rate is 57.5 cents per mile.


                You can choose to reimburse your employees using an FAVR allowance.


              7.  This is an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your employees' variable operating costs (such as gas, oil, etc.) plus a flat amount to cover your employees' fixed costs (such as depreciation, insurance, etc.)

          • -------------

          • Per diem allowance.

             

            If your employee actually substantiates to you the other elements (discussed earlier) of the expenses reimbursed using the per diem allowance, how you report and deduct the allowance depends on whether the allowance is for lodging and meal expenses or for meal expenses only and whether the allowance is more than the federal rate.

          • ------------

          • Miscellaneous Expenses

            In addition to travel, meal, and certain entertainment expenses, there are other expenses you can deduct.

            Advertising expenses.

             

            You generally can deduct reasonable advertising expenses that are directly related to your business activities.

          • ----------

          • Car and truck expenses.

             

            The costs of operating a car, truck, or other vehicle in your business may be deductible. For more information on how to figure your deduction, see Pub. 463.

            Charitable contributions.

             

            Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments aren’t charitable contributions or gifts and are directly related to your business

          • -----------

          • Club dues and membership fees.

             

            Generally, you can’t deduct amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or any other social purpose. This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions.

          • ------------

          • Credit card convenience fees.

             

            Credit card companies charge a fee to businesses who accept their cards. This fee when paid or incurred by the business can be deducted as a business expense.

          • -------------

          • Education expenses.

             

            Ordinary and necessary expenses paid for the cost of the education and training of your employees are deductible. 


            You can also deduct the cost of your own education (including certain related travel) related to your trade or business. You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job.

          • ------------

          • Franchise, trademark, trade name.

             

            If you buy a franchise, trademark, or trade name, you can deduct the amount you pay or incur as a business expense only if your payments are part of a series of payments that are:

            1. Contingent on productivity, use, or disposition of the item;

            2. Payable at least annually for the entire term of the transfer agreement; and

            3. Substantially equal in amount (or payable under a fixed formula)

            4. ---------.

            When determining the term of the transfer agreement, include all renewal options and any other period for which you and the transferor reasonably expect the agreement to be renewed.


            A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area

          • -----------------

          • Internet-related expenses.

             

            Generally, you can deduct Internet-related expenses including domain registration fees and webmaster consulting costs. If you are starting a business, you may have to amortize these expenses as start-up costs. For more information about amortizing start-up and organizational costs, see chapter 8.

            Interview expense allowances.

             

            Reimbursements you make to job candidates for transportation or other expenses related to interviews for possible employment aren’t wages. You can deduct the reimbursements as a business expense. -However, expenses for food and beverages are subject to the 50% limit discussed earlier under Meals and Entertainment.

            Legal and professional fees.

             

            Fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to operating your business are deductible as business expenses. However, legal fees you pay to acquire business assets usually aren’t deductible.

          • -----------

          • Licenses and regulatory fees.

             

            Licenses and regulatory fees for your trade or business paid annually to state or local governments are generally deductible..

          • ----------

          • Taxes and licenses

            You can deduct various taxes and licenses related to your business. This may include:

            • State income taxes - Payroll taxes - Personal property taxes
            • Real estate taxes paid on business property
            • Sales tax - Excise taxes - Fuel taxes - Business licenses
            • ----------- 

            Telephone and internet expenses

            If telephone and internet services are integral to your business, they can be deductible business expenses.

            Keep in mind, if you use a landline at home, you cannot deduct the cost of your first line, even if you use it solely for work. However, if you have a second landline devoted to the business, the cost of that line is deductible.

            If you use your cell phone and internet connection for both personal and business reasons, you can only deduct the percentage allocable to business use. Keep an itemized bill or other detailed records to prove the amount of business use in case your return is audited.

            Travel expenses

            For a trip to qualify as business travel, it has to be ordinary, necessary, and away from your tax home. Your tax home is the entire city or area in which you conduct business, regardless of where you live. You need to travel away from your tax home for longer than a normal day’s work, requiring you to sleep or rest en route.

            Deductible, IRS approved business travel expenses include:

            • Travel to and from your destination by plane, train, bus, or car
            • Using your car while at a business location
            • Parking and toll fees
            • The cost of taxis and other methods of transportation used on a business trip
            • Meals and lodging
            • Tips
            • Dry cleaning while on a business trip
            • Business calls
            • Shipping of baggage and sample or display materials to your destination
            • Other similar ordinary and necessary expenses related to your business travel

            Remember to keep records that include the amount of each expense, as well as dates of return/departure, details of the trip (whom you met with), a mileage log if you drove your own vehicle, and the business reason for the trip.

          • ------------------

          • Paying mortgage interest may reduce your taxable incom
          • A mortgage interst credit is a tax deduction that can be filed on your federal income tax returns. According to the IRS (and Form 8223 that is filed for mortgage interest credit), you have to possess a Mortgage Credit Certificate (MCC). An MCC is deducted from your income so it makes additional money available to you that you can in turn apply to qualifying for a mortgage.

          • Determining How Much Interest You Paid on Your Mortgage

            You should receive Form 1098, the Mortgage Interest Statement, from your mortgage lender after the close of the tax year,

          • --------------

          • Federal Income Tax Rates, Brackets, & Standard Deduction

          • Standard deduction...

            Under United States tax law, the standard deduction is a dollar amount that non-itemizers may subtract from their income before income tax is applied. Taxpayers may choose either itemized deductions or the standard deduction, but usually choose whichever results in the lesser amount of tax payable.
          •  The standard deduction is available to US citizens and aliens who are resident for tax purposes and who are individuals, married persons, and heads of household. The standard deduction is based on filing status and typically increases each year.
          • -------------
          • Income Tax: What to Know About Tax Evasion and Avoidance...

          • The true total cost of tax evasion cannot be known, but the IRS reported an average annual gross tax gap of $441 billion , with the IRS recovering $60 billion through voluntary late payments and enforcement activities.

          • "The tax gap is how much people should have paid versus how much they actually paid.
        • Tax evasion is the use of illegal means to avoid paying taxes. Examples of tax evasion might include claiming illegitimate deductions, misreporting or underreporting income and setting up shell corporations overseas.

          "People who take cash payments or work under the table, that is tax evasion and that is illegal – even if they did not get a 1099, they are required to report it"

        • ---------

        • What Is Tax Evasion vs. Tax Avoidance?

          While tax evasion is illegal, tax avoidance – also known as strategic tax planning – is taking legal steps to pay less in taxes. Tax avoidance is a common practice among individuals and businesses. In fact, anyone who has utilized a company 401(k) or personal IRA has engaged in tax planning to limit taxes owed.

        • ------------

        • For the typical taxpayer who is not self-employed, options for tax avoidance are limited. Examples include using tax-advantaged savings accounts, such as retirement or educational savings plans, taking steps to avoid realizing capital gains over the years or engaging in charitable giving.

          Experts say corporations, self-employed individuals and individuals with the means to hire accountants and tax attorneys to manage their wealth may have more options at their disposal.

          Whether a business or an individual, deciding when tax avoidance becomes tax evasion can be a gray area depending on who you consult.

        • --------

        • Penalties for Tax Evasion

          Tax evasion is a criminal activity and can result in jail time. However, the penalties for underpaying taxes can vary widely. Taxpayers who realize their income was underreported or that they otherwise made a mistake on their return can file a 1040-X, which can correct an already-filed form 1040, make certain elections after the deadline and change amounts adjusted by the IRS, among other things.

          In more severe cases, taxpayers and corporations may be able to negotiate what they owe with the IRS or may need to go through proceedings in a formal tax court setting. But for the typical taxpayer, experts say a worst-case scenario would involve paying a penalty.

        • ------------

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          People may be hesitant to file if they can't pay their bill, but you can always request a payment plan. What's more, the penalty for failing to file is significantly more than the penalty for failing to pay.
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          Refunds are forfeited after three years. Some people don't bother filing their federal return because they are short on time and know the government owes them money.
          While there is no failure-to-file penalty on returns that are due a refund, procrastinating can still cost you. If you wait too long, you won't be able to claim the refund at all. www.knowledgefinancialgroup.com/institute
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          You may not need to itemize your deductions. Taxpayers of all filing statuses will see their standard deductions nearly double when they file returns next year, thanks to the Tax Cuts and Jobs Act. The law increases the standard deduction for married couples filing jointly.
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          People can still get a tax break for charitable contributions through. One way is for retirees to direct a portion of their required minimum distribution, known as an RMD, to a nonprofit organization.
          When seniors turn age 70 ½, they are required to take an RMD from traditional IRA and 401(k) accounts, even if they don't need the money. www.knowledgefinancialgroup.com/incometax
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          Taxes should be part of every retirement planning discussion. Part of planning for retirement should be planning for taxes. Some money, such as funds from traditional retirement accounts, is taxable in retirement.
          However, cash from Roth accounts can be withdrawn tax-free. Meanwhile, Social Security benefits can be partially taxed once an individual reaches $25,000 in combined income or a couple has $32,000 in combined income. www.knowledgefinancialgroup.com/TAXES
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          Tax professionals can help navigate complex situations. Don't leave money on the table. Make sure you've claimed all possible deductions by using a CPA or professional tax preparer. This may be especially important for those with investments or business owners. www.knowledgefinancialgroup.com/NEWS-LETTER
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        • How Rental Property Depreciation Works

          Real estate depreciation can save you money at tax time

        • Real estate depreciation is an important tool for rental property owners. It allows you to deduct the costs from your taxes of buying and improving a property over its useful life, and thus lowers your taxable income in the process.
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          • Rental property owners use depreciation to deduct the purchase price and improvement costs from your tax returns.
          • Depreciation commences as soon as the property is placed in service or available to use as a rental.
          • By convention, most U.S. residential rental property is depreciated at a rate of 3.636% each year for 27.5 years.
          • Only the value of buildings can be depreciated; you cannot depreciate land.
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          • Tax Write-Offs

            Investing in rental property can prove to be a smart financial move. For starters, a rental property can provide a steady source of income while you build equity in the property as it (ideally) appreciates over time. There are also several tax benefits. You can often deduct your rental expenses from any rental income you earn, thereby lowering your overall tax liability.

            • Most rental property expenses, including mortgage insurance, property taxes, repair and maintenance expenses, home office expenses, insurance, professional services, and travel expenses related to management are all deductible in the year you spend the money. 

              Real Estate Depreciation

              Another key tax deduction—namely the allowance for depreciation—works somewhat differently. Depreciation is the process used to deduct the costs of buying and improving a rental property. Rather than taking one large deduction in the year you buy (or improve) the property, depreciation distributes the deduction across the useful life of the property.

              The Internal Revenue Service (IRS) has very specific rules regarding depreciation, and if you own rental property, it’s important to understand how the process works.

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            • When Does Depreciation Start?

              You can begin taking depreciation deductions as soon as you place the property in service or when it's ready and available to use as a rental.2

              Here's an example: You buy a rental property on May 15. After working on the house for several months, you have it ready to rent on July 15, so you begin to advertise online and in the local papers. You find a tenant, and the lease begins on Sept. 1. As the property was placed in service—that is, ready to be leased and occupied—on July 15, you would start to depreciate the house in July, and not in September when you start to collect rent.

              You can continue to depreciate the property until one of the following conditions is met:

              • You have deducted your entire cost or other basis in the property.
              • You retire the property from service, even if you have not fully recovered its cost or other basis. A property is retired from service when you no longer use it as an income-producing property—or if you sell or exchange it, convert it to personal use, abandon it, or if it's destroyed.

              You can continue to claim a depreciation deduction for property that's temporarily "idle" or not in use. If you make repairs after one tenant moves out, for example, you can continue to depreciate the property while you get it ready for the next.

              How to Calculate Depreciation

              Three factors determine the amount of depreciation you can deduct each year: your basis in the property, the recovery period, and the depreciation method used.

              Any residential rental property placed in service after 1986 is depreciated using the Modified Accelerated Cost Recovery System (MACRS), an accounting technique that spreads costs (and depreciation deductions) over 27.5 years. This is the amount of time the IRS considers to be the “useful life” of a rental property.

              While it’s always recommended that you work with a qualified tax accountant when calculating depreciation, here are the basic steps:

              1. Determine the basis of the property. The basis of the property is its cost or the amount you paid (in cash, with a mortgage, or in some other manner) to acquire the property. Some settlement fees and closing costs, including legal fees, recording fees, surveys, transfer taxes, title insurance, and any amount the seller owes that you agree to pay (such as back taxes), are included in the basis. Some settlement fees and closing costs can’t be included in your basis. These include fire insurance premiums, rent for tenancy of the property before closing, and charges connected to getting or refinancing a loan, including points, mortgage insurance premiums, credit report costs, and appraisal fees.3
              2. --------------------
              3. Separate the cost of land and buildings. As you can only depreciate the cost of the building and not the land, you must determine the value of each to depreciate the correct amount. To determine the value, you can use the fair market value of each at the time you bought the property, or you can base the number on the assessed real estate tax values. Say you bought a house for $110,000. The most recent real estate tax assessment values the property at $90,000, of which $81,000 is for the house and $9,000 is for the land. Therefore, you can allocate 90% ($81,000 ÷ $90,000) of the purchase price to the house and 10% ($9,000 ÷ $90,000) of the purchase price to the land.
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              5. Determine your basis in the house. Now that you know the basis of the property (house plus land) and the value of the house, you can determine your basis in the house. Using the above example, your basis in the house—the amount that can be depreciated—would be $99,000 (90% of $110,000). Your basis in the land would be $11,000 (10% of $110,000).
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              7. Determine the adjusted basis, if necessary. You may have to make increases or decreases to your basis for certain events that happen between the time you buy the property and the time you have it ready for rental. Examples of increases to basis include the cost of any additions or improvements that have a useful life of at least one year made before you place the property in service, money spent to restore damaged property, the cost of bringing utility services to the property, and certain legal fees.

              8.  Decreases to the basis can be from insurance payments you receive as the result of damage or theft, casualty loss not covered by insurance for which you took a deduction, and money you receive to grant an easement.
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              10. -----------

                What You Need to File?

                Taxpayer Identification Number

                A taxpayer identification number is required on all of your tax-related documents.

                Most taxpayer identification numbers are Social Security numbers.

                If you are not eligible for a Social Security number, you must use an individual taxpayer identification number, or ITIN. ITINs are issued only for federal tax filing and reporting.

                An ITIN does not:

                • Authorize you to work in the U.S.
                • Make you eligible for Social Security benefits
                • Qualify you for the Earned Income Tax Credit
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                How to File

                Electronic Filing

                Electronic filing – or e-filing – is when you use commercial tax preparation software to send your income tax return to the IRS over the internet.

                If you e-file your tax return, you will usually receive your tax refund within 3 weeks of the date we receive your return – even faster if you choose to have your refund deposited into your bank account. We have several e-file options, including Free File.

                Free File

                With Free File, you can prepare and file your federal income tax return for free using tax preparation and filing software.

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                Filing for Your Business

                What You Need to File

                Employer Identification Number

                Most businesses – and all employers – need an Employer Identification Number, or EIN, in order to file taxes. You can apply for an EIN online and get your number immediately.

                Business Taxes

                The structure of your business determines what business taxes you must pay and how you pay them.

                Remember, you must pay your taxes on your income by making regular estimated tax payments during the tax year.

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                Business Income Tax

                All businesses except partnerships must file an annual income tax return. Partnerships file an information return.

                Which form you use depends on how your business is organized. Refer to Business Structures to find out which forms you must file based on the business entity you established.

                Employment Taxes

                If you have employees, you will need to pay employment taxes. Employment taxes include:

                • Social Security and Medicare taxes
                • Federal income tax withholding
                • Federal unemployment tax
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                Excise taxes

                You may need to pay excise tax if your business:


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