The News Reporter | Tax Tips | 1
Tax Tips 2014
The News Reporter / Thursday, January 16, 2014
The News Reporter | Tax Tips | 2
Getting ready for tax season A new year not only brings a host of new opportunities, but it also brings a host of familiar obligations. One such obligation is paying taxes, which doesn’t have to be done until midApril. But waiting until the last minute with respect to taxes can make the process even more difficult, and putting it off certainly won’t help those people who vowed to stop procrastinating in the new year. Getting a headstart on tax season can be beneficial in numerous ways, not the least of which is avoiding the last-minute rush to file your return come the filing deadline. Even if you have yet to receive your W-2 (which you should have in hand by January 31), there are steps you can take to get ready for the coming tax season. • Gather your documents. Your W-2 is likely not the only document you will need to prepare your tax return. Statements regarding your investments, student loan payments, mortgage and a host of other documents might be necessary for you to fill out your return. You should start receiving these documents in January, so gather them as they come in and keep them in a convenient place. This will ensure you don’t get frustrated when filling out your return
while increasing the chances you earn all of the credits and deductions you deserve. • Examine past returns. Many people have questions when filling out their tax returns, but those who wait until the waning days of tax season to prepare their returns ignore those questions in an effort to make the filing deadline. When you start preparing for tax season early, examine past returns and see if there are any questions you wanted to ask in the past that you didn’t have time for. Write these questions down as you comb through your past returns and bring the questions to your tax preparer when the time comes. If you don’t plan on hiring a professional to prepare your taxes, you can contact the IRS with your questions, and the earlier you do so, the more quickly you are likely to have your questions answered. • Take your time. When you decide to get an early start on your taxes, you allow yourself to take your time preparing your return. This reduces the likelihood of getting stressed when filing your return. Many people get a bit nervous when filing a tax return, but that stress can be even greater if you leave everything until the last minute. If you’re starting early, take your time
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when working on your return and don’t succumb to any potential stressors. • Consider hiring a professional. Starting early also gives you an opportunity to determine if preparing your own return is too tall a task. If that’s the case, consider hiring a professional to prepare your return. If you decide to hire a professional, do so
early so that person has more time to devote to your return. If you wait too long, chances are the tax preparer will be buried with many other customers’ returns and won’t be able to devote as much time to preparing your return as you would like. More information about getting ready for tax season is available at www.irs.gov.
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The News Reporter | Tax Tips | 3
Seven smart uses for your tax refund You finished your tax returns and discovered you’ll be receiving a nice refund. You’re not alone. The IRS reports that the average American received a refund of nearly $3,000 in 2012. But before you start dreaming of a tropical vacation or a shopping spree, consider how that money could help you shore up your financial situation. Here are seven suggestions to consider. 1. Pay off credit card debt. Maintaining any balance—but especially the maximum—on a high-interest credit card costs you money every month. Pay off or cut down your balance and, depending on your account balance, you could save hundreds of dollars in interest fees this year. 2. Boost your emergency fund. Experts recommend stashing the equivalent of three to six months’ worth of income in an emergency fund. If your account is low, has been depleted or doesn’t exist yet, use your refund to help cover your expenses in an emergency. 3. Ramp up retirement savings. According to a 2012 poll by the Pew Research Center, approximately 38 percent of U.S. adults are not confident
ing in home improvements can pay off in reduced energy bills. For example, replacing an old refrigerator with a new ENERGY STAR®-rated unit can save you $200 to $1,100 over the lifetime of the appliance. 7. Bolster your life insurance. If it’s been awhile since you reviewed your insurance coverage, this may be a prime opportunity. As life progresses and your situation changes, you may find you’re underinsured. Your State Farm agent can help you determine the level of coverage that’s right for you. Neither State Farm nor State Farm agents provide tax, legal, or investment advice. Consult your tax, legal, or investment advisor regarding your specific circumstances. they’ll have the money to retire. If you’ve gotten behind in your savings, this may be the place to put your tax refund. Depending on your situation, age and income level, contributing to a traditional IRA or a Roth IRA is an option worth looking at. 4. Start or add to a college fund. Even if your kids are young, those
college tuition bills will be arriving before you know it! Seek out an educational savings plan and get a head start on your child’s education. 5. Make an investment. Consider putting your refund money to work for you. Talk to your State Farm® agent about your options. 6. Improve your efficiency. Invest-
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The News Reporter | Tax Tips | 4
Simple means to saving money If the ongoing recession has taught people anything, it’s the need for saving money. Many people were caught off guard by the recession, and studies have shown just how little men and women had saved before the bottom fell out on the economy. In a 2013 poll from the National Foundation for Credit Counseling, 64 percent of respondents admitted they would not be able to rely on their savings account if a $1,000 unplanned expense suddenly popped up. And the problem of not saving enough is not exclusive to Americans. A 2013 survey from the Canadian Payroll Association indicated that 57 percent of the nearly 2,100 respondents admitted they would be in financial trouble if their pay was delayed by just one week, while 40 percent expect to delay their retirement due to lack of savings. Such figures should be enough to motivate men and women to start saving, not only for retirement but for an unforeseen event like a layoff that could put finances in serious jeopardy. There are ways men and women can save money that don’t require too much sacrifice. • Pay extra each month on loans.
If paying extra money each month sounds like an odd way to save money, keep in mind that paying ahead
on loans can substantially reduce the amount of interest that accrues over the course of the loan. Some loan agreements include prepayment
penalties that actually penalize cus• Shop sales. Shopping sales is a tomers for paying ahead. But if the simple way to save, yet many people loan agreement has no such penal- still don’t take advantage of sales. Whether grocery shopping, shopping for home furnishings or adding on to your wardrobe, shopping sales is a great way to save substantial amounts of money. When visiting the grocery store, sign up for the store’s club membership, which in many cases automatically earns you sale prices as long as you remember to swipe the club card before paying. When shopping for clothes, peruse the clearance racks, especially at the end of the season, when stores simply want to get rid of items and, as a result, mark them down heavily. The items will still be wearable next season, and you will have saved a lot of money without doing much work. • Re-examine existing insurance policies. An insurance company is not liable to call you and offer lower rates. However, a consumer often finds his or her company is willing to lower rates for those who initiate the conversation. For example, motorists ties, sending a little extra each month who have gone a significant amount reduces the loan’s principle faster, of time since their last speeding ticket meaning borrowers will pay less in Continued on page 5 interest and pay off their loans faster.
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The News Reporter | Tax Tips | 5
Where’s my refund? 1. When to check...
-72 Hours after you e-file -4 Weeks after you mail your paper return
2. What you need... -Social security number -Filing status -Exact refund amount
3. How...
-Get your refund status at Https://sa2.Www4.Irs.Gov/irfof/lang/en/irfofgetstatus.Jsp
If you e-file, you can generally expect your refund in less than 21 days. There is no need to call our toll-free number unless “where’s my refund?” Specifically indicates that you should.
Information courtesy of irs.gov
Saving money Continued from page 4
or traffic accident can often renegotiate their auto insurance policies and earn a lower rate. Some companies will automatically lower these rates, while others need some prodding. Oftentimes, the threat of cancellation is enough to motivate a company to reduce insurance costs. But policy holders won’t know unless they try. If the company claims there’s no wiggle room, start shopping around for a new company, and don’t hesitate to jump on a more affordable policy, even if it can be a hassle to change companies and policies. Another thing to consider when examining insurance policies if the level coverage is still necessary. For instance, men and women who opened an auto policy when their car was brand new might not want full coverage now that the car has gotten older. Reducing coverage can save significant amounts of money. Contact your credit card provider. Credit card holders in good standing almost always have the means to saving money at their disposal. That’s because the credit card company will likely be willing to lower your interest rate if you are a customer in good standing. Lowering the interest rate can save card holders significant amounts of money, but it’s still ideal for card holders to pay off their balances each month and avoid interest accruing in the first place. When speaking with a representative of your credit card company, discuss any additional benefits the company might provide. For example, some cards have an incentive program that provides cash back on qualifying purchases, which might include groceries or airline tickets. If your card offers such incentives, take full advantage of them, just be sure to pay off the balance in full each month. Saving money is something many people insist they will start doing tomorrow. But it’s the little changes you make today that can add up to significant savings down the road.
The News Reporter | Tax Tips | 6
Don’t forget finances when making resolutions When the time comes to make New Year’s resolutions, the conventional wisdom is to focus on weight. Such wisdom is understandable, as many people spend the holiday season indulging in big meals and all the treats synonymous with having fun. While it’s acceptable to make healthy resolutions, a slimmer waist and a healthier diet should not be the only goals for the year ahead. In light of the last several years, it’s important for men and women to make financial resolutions for the year ahead, too. No one can say with certainty when, or if, the economy will rebound, and men and women should look at the New Year as a suitable time to make some financial resolutions for the future. • Reassess your investment plan. Since 2008, the market has been up and down like a roller coaster. Those who have weathered the storm have no doubt witnessed big gains and significant losses over the last few years, and the turn of the calendar is a great time to reassess investments and possibly make some changes. Are you taking on more risk than you’re comfortable with? Is your portfolio too conservative? How well are you diversifying? Look at your investments
from every angle and determine if it’s time to make some changes. • Resolve to be more liquid. A poll from the National Foundation for Credit C o u n seling f o u n d that 64 percent of Ameri c a n s would need to utilize a source o t h e r t h a n their savings account to pay for a $1,000 unplanned expense. That percentage illustrates that most adults just don’t have enough cash on hand. This year, resolve to be more liquid. Being more liquid enables you to more effectively handle emergencies, and it also helps you avoid being forced to sell investments at the wrong time. • Shake things up. If you rely on one individual to handle all of your
financial needs, such a practice needs to change. No matter how much you trust this person, don’t fall into a trap where one person acts as your financial svengali. Such an arrangem e n t proved v e r y costly to those men and women w h o trusted the likes of Bernie Madoff, a once-prominent financier who turned out to be nothing more than a criminal mastermind orchestrating history’s largest Ponzi scheme. This year, if you haven’t done so already, make sure your financial advisor, money manager, custodian, and trustee are all different people. • Negotiate lower rates. Use the onset of the New Year as a chance to negotiate newer and lower inter-
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The News Reporter | Tax Tips | 7
How to manage personal debt As if anyone needs their memory jogged, debt is a substantial problem for men and women living in fully developed countries. Estimates vary, but numerous surveys have indicated the average American household has more than $10,000 in credit card debt, a figure that doesn’t include debt such as mortgages, car loans or student loans. What these figures illustrate is that even the most financially savvy debtor may be in a precarious position, one that, should an unforeseen layoff or medical emergency occur, could turn disastrous in a relatively short period of time. As a result, an individual’s ability to manage personal debt is of paramount importance, and the following tips can help men and women walking a financial tightrope address their debt in a way that might help them get back on their financial feet. Applying your tax refund to these strategies may ease your personal stresses. • Eliminate bad debt. Not all debt is bad, but credit card debt is rarely good. Card holders with substantial credit card debt should contact their companies as soon as possible to see if the company is willing to work with them on a repayment plan. This
is more prudent than declaring for bankruptcy, which will negatively impact an individual’s credit score for years to come. Companies are often willing to work with card holders about repayment plans that make it easier to pay down debt. But once an agreement is made, card holders must make meeting the terms of that agreement their top priority. • Stop accruing bad debt. Using a card wisely is the key to avoiding unnecessary debt. When using credit cards, do not use them for everyday purchases like groceries or movie tickets. This type of credit card usage is habit forming, and it’s very easy for card holders to quickly amass a large balance on their accounts for items they could just as easily could have paid for with cash. Keep in mind interest will be charged on all balances not paid in full each month, so don’t make that cup of coffee or that pair of movie tickets cost even more by adding interest to the overall cost. • Pay down high-interest debts first. Always work to pay down highinterest debt first while paying a little more than the minimum on low-interest debt. If a car loan came with an especially high interest rate (hint: borrowers whose down payment on a
car loan was small or nonexistent are likely saddled with a high-interest loan), work to pay down that balance as much as possible. Something as simple as paying an extra $25 per month on a $200 per month car payment can reduce the length of time it takes to pay off that loan considerably. Once a high-interest debt is paid off, move on to the debt with the next highest interest rate. • Stop paying the bare minimum. Paying just the minimum will barely cover the interest. That means the principal will hardly disappear, and the debt will be a seemingly impossible obstacle to overcome. Pay more than the bare minimum each month, even if it means making sacrifices elsewhere. • Avoid borrowing from Peter to pay Paul. Transferring balances from a high-interest card to a low-in-
terest card is one thing, but borrowing against property or a retirement savings account is playing with fire. With regards to borrowing against a 401(k), the penalty to do so, not to mention the extra income tax such a withdrawal will accrue, before retirement is substantial. In addition, the value of those retirement savings will suffer considerably as the interest earned will be on that much less money until the full amount is paid back to the account.
Save money on taxes with charitable donations We’ve all heard the saying about nothing being certain but death and taxes. As the calendar year comes to a close, many people might be thinking about how to reduce their taxable income. Charitable giving is one way to pay less in taxes. In many cases, tax-deductible charitable giving can save a person money in the long run. The added bonus is that it can feel good to give as well. Making charitable donations can save a person thousands in tax dollars, provided the correct steps are taken. 1. Ensure the charity is a tax-exempt organization eligible to receive tax-deductible donations.
2. Be sure to keep all receipts for charitable giving throughout the year. Generally donations less than $250 can be recorded with a cancelled check. Other donations will need a written acknowledgment from the charity. 3. Itemize donations when filing tax returns. If non-cash donations were given (such as clothing or automobiles) be sure to complete the applicable tax form. 4. Figure out the fair market value of items being donated that aren’t cash. This will help determine the value of the chari-
table deduction when it’s time to file a tax return. 5. Address any questions concerning charitable donations to a knowledgeable tax preparer or accountant.
The News Reporter | Tax Tips | 8
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The News Reporter | Tax Tips | 10
Taxpayer guide to identity theft BIG
We know identity theft is a frustrating process for victims. We take this issue very seriously and continue to expand on our robust screening process in order to stop fraudulent returns. What is identity theft? Identity theft occurs when someone uses your personal information such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. How do you know if your tax records have been affected? Usually, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund. Generally, the identity thief will use a stolen SSN to file a forged tax return and attempt to get a fraudulent refund early in the filing season. You may be unaware that this has happened until you file your return later in the filing season and discover that two returns have been filed using the same SSN. Be alert to possible identity theft if you receive an IRS notice or letter that states that: More than one tax return for you was filed, You have a balance due, refund offset or have had collection actions taken against you for a year you did not file a tax return, or
IRS records indicate you received wages from an employer unknown to you. What to do if your tax records were affected by identity theft? If you receive a notice from IRS, respond immediately. If you believe someone may have used your SSN fraudulently, please notify IRS immediately by responding to the name and number printed on the notice or letter. You will need to fill out the IRS Identity Theft Affidavit, Form 14039. For victims of identity theft who have previously been in contact with the IRS and have not achieved a reso-
lution, please contact the IRS Identity Protection Specialized Unit, toll-free, at 1-800-908-4490. How can you protect your tax records? If your tax records are not cur-
rently affected by identity theft, but you believe you may be at risk due to a lost/stolen purse or wallet, questionable credit card activity or credit report, etc., contact the IRS Identity Protection Specialized Unit at 1-800908-4490. How can you minimize the chance of becoming a victim? Don’t carry your Social Security card or any document(s) with your SSN on it. Don’t give a business your SSN just because they ask. Give it only when required. Protect your financial information. Check your credit report every 12 months. Secure personal information in your home. Protect your personal computers by using firewalls, antispam/virus software, update security patches, and change passwords for Internet accounts. Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.
Taking these 10 steps will greatly reduce your risk of identity theft: 1. Protect the trash. Shred any documents with personal identifiable information, even junk mail! Don’t leave these documents where others (e.g., roommates, service people) can view them. Permanently erase data from old computers before you recycle them. 2. Spot phish. Never click on links you receive in unsolicited emails, even if you are familiar with the organization advertised. Instead, call them or type in the URL in your browser. 3. Defend the mailbox. Use secure post office drops for sending important and sensitive documents. Opt out of free credit offers and junk mail. 4. Protect the number. Don’t carry your Social Security card in your wallet or write your Social Security number on a check. 5. Mum’s the word. Don’t give out personal information on the phone, through the mail, or over the Internet unless you are sure with whom you are dealing.
6. Tweet responsibly. Use social networks responsibly. Don’t announce location information, don’t friend strangers, learn the privacy controls of each application and use them. 7. Lock it up. Paper or electronic, make it difficult to obtain your documents. Lock your computer, phone, filing cabinet. 8. Don’t be obvious. Use non-obvious passwords. Your mother’s maiden name or the last four digits of your Social Security number are TOO obvious.
9. Take three free. Review your credit report annually; the report is free. 10. Eagle eye. Review every financial, medical, and benefits statement you receive. Create a habit of reviewing employment or other life-important statements on a regular basis. Meanwhile, make it as difficult as you can for data thieves by using strong passwords. If they do crack your defenses, give them nothing to steal by following the rule of “Find it. Delete it. Protect it.”
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The News Reporter | Tax Tips | 11
Year-end tax tips to help boost your return By Staff Writer State Farm™ Employee Take advantage of smart year-end financial moves that can help reduce your income tax liability when you file next spring. Bernard Kiely, CFP, CPA, dean of the National Association of Professional Financial Advisors (NAPFA) University School of Taxation, offers these tips: 1. Donate to qualified charities and organizations You can generally deduct contributions of up to 50 percent of your adjusted gross income to qualified charities and organizations if they’re made before December 31. Consider: • Donating stock. You can generally deduct the fair market value of donated stock. • Using a community foundation. You direct the money, and the foundation pays it out over a period of years. You can generally deduct the donation the year you paid the foundation. Check out eight tips for deducting donations. 2. Contribute to your 401(k) Add pre-tax money to your 401(k) before the end of the year to reduce your taxable income. 3. Sell losing stock Sell losing stock before year’s end to
deduct the capital losses against any from successful stock. Once you’ve capital gains you realized, and reduce offset your capital gains, you, as an inyour taxes on the money you earned dividual, can generally use any excess
losses to reduce ordinary income up to an annual limit of $3,000. Learn 10 facts about capital gains and losses. 4. Focus on long-term capital gains “A short-term capital gain is a stock or mutual fund you’ve bought and sold in less than one year,” says Kiely. Long-term capital gains have are taxed at fixed interest rates. Short-term capital gains are taxed at your ordinary income tax rate. Use the time now to evaluate your financial portfolio and shift more funds to investments that offer longer-term tax savings. 5. Fund an education savings account Many states allow residents to deduct contributions made to an education savings account. And with some types of accounts, the money can be withdrawn tax-free. The stipulation: The cash must cover educational expenses. These are just five ways to help reduce your tax liability—visit a financial planner for many more. State Farm® agents do not provide tax, legal or investment advice. Please consult a tax, legal or investment advisor in regards to your personal situation.
Year-End Tax Tips To Help Boost Your Return By Mary B. Williamson, State Farm® Agent Take advantage of smart year-end financial moves that can help reduce your income tax liability when you file next spring. Bernard Kiely, CFP, CPA, dean of the National Association of Professional Financial Advisors (NAPFA) University School of Taxation, offers these tips: 1. Donate to qualified charities and organizations You can generally deduct contributions of up to 50 percent of your adjusted gross income to qualified charities and organizations if they’re made before December 31. Consider: Donating stock. You can generally deduct the fair market value of donated stock. Using a community foundation. You direct the money, and the foundation pays it out over a period of years. You can generally deduct the donation the year you paid the foundation. Check out eight tips for deducting donations. 2. Contribute to your 401(k) Add pre-tax money to your 401(k) before the end of the year to reduce your taxable income.
3. Sell losing stock Sell losing stock before year’s end to deduct the capital losses against any capital gains you realized, and reduce your taxes on the money you earned from successful stock. Once you’ve offset your capital gains, you, as an individual, can generally use any excess losses to reduce ordinary income up to an annual limit of $3,000. Learn 10 facts about capital gains and losses. 4. Focus on long-term capital gains “A short-term capital gain is a stock or mutual fund you’ve bought and sold in less than one year,” says Kiely. Long-term capital gains have are taxed at fixed interest rates. Short-term capital gains are taxed at your ordinary income tax rate. Use the time now to evaluate your financial portfolio and shift more funds to investments that offer longer-term tax savings. 5. Fund an education savings account Many states allow residents to deduct contributions made to an education savings account. And with some types of
accounts, the money can be withdrawn tax-free. The stipulation: The cash must cover educational expenses. These are just five ways to help reduce your tax liability— visit a financial planner for many more. State Farm® agents do not provide tax, legal or investment advice. Please consult a tax, legal or investment advisor in regards to your personal situation. Before investing, consider the funds’ investment objectives, risks, charges and expenses. Contact State Farm VP Management Corp (1-800-447-4930) for a prospectus or summary prospectus containing this and other information. Read it carefully. AP2011/10/1024 Investing involves risk, including potential for loss. Securities and insurance products are not FDIC insured, are not guaranteed by State Farm Bank® and are subject to investment risk, including possible loss of principal. A 10 percent tax penalty may apply for withdrawals from taxqualified products before age 59½.
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The News Reporter | Tax Tips | 12
Tax fraud alerts IRS wants you to know about schemes, scams and cons
“If it sounds too good to be true, it probably is!” Don’t become a victim to any scheme that offers instant wealth or exemption from your obligation as a United States citizen to file tax returns and/or pay taxes. Some of these schemes can literally cost you your life savings. Others can result in your prosecution and imprisonment if you knowingly participate in them.
Abusive return preparer Taxpayers should be very careful when choosing a tax preparer. While most preparers provide excellent service to their clients, a few unscrupulous return preparers file false and fraudulent tax returns and ultimately defraud their clients. It is important to know that even if someone else prepares your return, you are ultimately responsible for all the information on the tax return.
Abusive tax schemes Abusive tax scheme originally took the structure of fraudulent domestic and foreign trust arrangements. However, these schemes have evolved into sophisticated arrangements to give the appearance that taxpayers are not in control of their money. However, the taxpayers receive their funds through debit/credit cards or fictitious loans. These schemes often involve offshore banking and sometimes establish scam corporations or entities.
Nonfiler enforcement There have always been individuals who, for a variety of reasons, argue taxes are voluntary or illegal. The courts have repeatedly rejected their arguments as frivolous and routinely impose financial penalties for raising such frivolous arguments. Take the time to learn the truth about frivolous tax arguments.
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All program and emphasis areas for criminal investigation Criminal Investigation has categorized their investigative cases into specific program and emphasis areas of fraud. Examples of case summaries written from public record documents where cases were prosecuted can be viewed on the various program and emphasis area web pages.
Tax scams - how to report them To help the public recognize and avoid abusive tax schemes, the IRS offers an abundance of educational materials. Participating in an illegal scheme to avoid paying taxes can result in imprisonment and fines, as well as the repayment of taxes owed with penalties and interest. Education is the best way to avoid the pitfalls of these “too good to be true” tax scams.
Wilton A. Thigpen, Jr. Vice President Financial Advisor
1055 Military Cutoff Rd. Suite 200 Wilmington, NC 28405 Phone: 910-509-9550 Direct: 910-509-0822 Toll Free: 866-509-9550 Fax: 910-509-2818 wilton.thigpen@rbc.com A division of RBC Capital Markets, LLC. Member NYSE/FINRA/SIPC.
The News Reporter | Tax Tips | 13
Going green? Top tax breaks
Going green can be good for the environment and for your tax situation Going green – as individuals and as businesses – has helped to reduce pollution and decrease tax bills in recent years. However, many federal tax incentives expired on Dec. 31, 2011. “There aren’t that many green tax incentives out there right now for individual taxpayers,” said Mike Scholz, tax director of Wegner CPAs, LLP, in Madison, Wisconsin. “And there aren’t going to be a lot of new ones coming up. Unfortunately for taxpayers, we’re kind of stuck in a holding pattern.” Ronnie Kweller, director of media relations for the Alliance to Save Energy, a Washington, D.C.-based nonprofit organization that promotes energy efficiency, agrees that passage of new federal tax credits or reinstatement of old ones is unlikely in the immediate future. “We hope they come back at some point, as they are very cost-effective investments that actually return money to the economy,” Kweller said, adding that she knows of no congressional effort to replace or extend tax breaks for green initiatives. While the glory days of tax incentives for going green might be over, a lot of benefits still are available if you know where to find them. The Database of State Incentives for Renewables & Efficiency (DSIRE), which is funded by the U.S. Department of Energy, is a comprehensive online resource for information on local, state, federal and utility-based incentives and policies that promote renewable energy and energy efficiency.
Renewable energy incentives that are here to stay One green federal tax incentive that will be around for a while is the tax credit for renewable home energy systems. And it’s a biggie. The credit — which will remain intact through Dec. 31, 2016, covers 30 percent of the cost of a new renewable energy system, with no upper limit. Unlike some tax incentives, it applies to any owned home – not just a primary residence. A tax credit for 30 percent of the cost of a residential fuel cell and microturbine system — up to $500 per 0.5 kilowatt of power capacity — is also available through Dec. 31, 2016. New construction and existing homes qualify for the credit, but the home must be your primary residence. Energy systems for rental homes are excluded from both credits.
Fuel your savings Tax credits for hybrid cars have expired, but they are still available for allelectric vehicles, referred to as qualified fuel cell motor vehicles. Visit the DOE’s Fuel Economy website, searchable by make, model and year, to see if your car is eligible for a tax credit and to obtain more information about state and local incentives for electric vehicles. Tax credits range from $2,500 to $7,500, based on the vehicle’s battery capacity.
Converging efforts Jarid Manos of Great Plains Restoration Council has an interesting take that combines tax breaks for going green with job creation for veterans. “While there are several commonly known tax benefits from efforts such as improving energy efficiency, investments in installing locally produced solar and wind renewable energy, and installing water conservation systems, Great Plains Restoration Council wants to highlight a little-known innovation for tax benefits and going green – hiring people to do ecosystem restoration work,” Manos said. Those new hires, he suggested, can be U.S. veterans returning home from Iraq or Afghanistan. The Vow to Hire Heroes Act, signed into law in November 2011, provides tax credits of up to $5,600 for each veteran hired and up to $9,600 if the veteran was wounded. “The least we can do for America’s returning veterans is offer them a good job,” Manos said. “And veterans who have served in the United States Armed Forces come with a lot of skills perfect for outdoor crew work and team performance in challenging climates and situations.”
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Brian Slagle Agency 910-640-3989 • brianslagle@allstate.com
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Going green?
The News Reporter | Tax Tips | 14
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Donations for dollars Many taxpayers are familiar with the charitable contribution tax benefit of donating old clothes to the local thrift store. But did you know that the latest thing in charitable contributions is electronics recycling? Arman Sadejhi’s All Green Electronics Recycling in Tustin, California, provides “end-of-life” recycling services for electronics. If it plugs in or takes a battery, All Green accepts it. “Most of the time, these days, when people are getting rid of their unwanted electronics for recycling, they’re not getting rid of old junk,” Sadejhi said. “They’re getting rid of a cell phone that might be two years old or a slightly outdated game console or laptop. “The charitable contribution tax benefit is available to individuals when working either directly with a nonprofit or with a company like us who partners with nonprofits.” The best part, Sadejhi said, is that donors may assign their own fair market value to each item they donate based on what the item sells for on eBay or somewhere similar – within reason, of course. TurboTax has a tool called ItsDeductible that will do this for you. Just tell us what you donated, and the software will assign the appropriate value, based on IRS guidelines. If the donation is valued at less than $500, there are no forms to fill out. Once your total charitable contribution deductions exceed $500, you must submit Form 8283 with your tax return. The key is reuse, Sadejhi said. “It’s much more eco-friendly to put an item
into reuse than it is to simply recycle,” he said. “The IRS makes this credit available so that individuals are more likely to put an item into reuse as soon as possible while it has the highest fair market value.” Just make sure your outdated electronics go to a reputable company so they will be reused responsibly, and remember to get a receipt for your files. For more information, check out the Internal Revenue Service’s Guide to Charitable Contributions – Publication 526 – at irs.gov.
Become an Energy Star
The Energy Star program of the U.S. Environmental Protection Agency and the U.S. Department of Energy helps taxpayers save money and the environment by going green. “We would be using about 40 percent more energy in this country if it weren’t for the energy-efficient technologies that have been developed since the 1970s in the wake of the oil embargo,” said Ronnie Kweller, director of media relations for the Washington, D.C-based Alliance to Save Energy. While not all Energy Starqualified products are eligible for incentives and some tax breaks for energy efficiency expired in 2011, credits still are available through 2016 for some products. Even products that no longer provide tax credits can save you money by instantly lowering energy bills. For example, a programmable thermostat with the Energy Star label is not covered by tax credits, but it can reduce your heating and cooling bill by up to 10 percent.
Thompson, Price, Scott, Adams & Co., P.A. P.O. Box 398, 1626 S. Madison Street, Suite 100, Whiteville, NC • phone (910) 642-6182 • fax (910) 642-0447 301 West King St., Elizabethtown, NC • 4024 Oleander Dr., Wilmington, NC Thompson, Price, Scott, Adams & Co., P.A. provides a full range of accounting, audit, tax and consulting services designed to grow your business. If your company is looking to improve business operations, contact one of our CPA professionals to find out what we can do for you.
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Alan W. Thompson, CPA R. Bryon Scott, CPA Lorna O. Greene, CPA W. Andy Wayne, CPA Brandy Turbeville, CPA Carrie Reighard, CPA Stuart Hill, CPA
Accounting and Audit Services: Tax Services: Financial statements - audit, review, Income tax planning and compilation Tax return preparation Profit improvement ideas Estate tax planning Compliance reporting Consulting Services: Internal control safeguards Management advisory services Budgeting Business acquistions Bookkeeping and payroll preparation New business startup
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The News Reporter | Tax Tips | 15
Last minute tax tips for late filers Preparing your tax return doesn’t need to be hard or stressful. It just needs to be thorough and accurate. Give yourself plenty of time to work through the tax forms, and you’ll have confidence in filing your taxes. Your 2013 tax return is due by April 15, 2014. You can also request an automatic 6-month extension of time to file, making your deadline Oct. 15, 2014. In addition to taking full advantage of the added time, late-filing taxpayers should consider the following last minute tax tips as well. • File online. Filing online is quicker and, for those who file through the Internal Revenue Service Web site, it can even be free. Men and women who are anticipating a tax refund should strongly consider filing online, as e-filing generally gets people their refunds much more quickly than filing through the mail. In addition, filing online can alert taxpayers to any mistakes they might have made on their returns. • Don’t mistake a tax extension with an extension to pay your taxes. Men and women who file for a tax extension should know that an extension still requires taxpayers to estimate what they owe and send the IRS a check by April 18. A tax extension is only an extension to finish the paperwork, not an extension to pay. It’s important to know an extension request must be filed by April 18.
• Make an accurate estimate. Individuals who have filed an extension and are estimating what they owe
Get your refund faster -- tell IRS to direct deposit your refund to one, two or three accounts You have several options for receiving your federal income tax refund. You can: Split your refund with direct deposits into two or three checking or savings accounts Direct deposit your refund into one checking or savings account Receive your refund as a paper check in the mail Buy up to $5,000 in U.S. Series I Savings Bonds with your refund Splitting your refund is easy. Use IRS’ Form 8888, Allocation of Refund (Including Savings Bond Purchases). Just follow the instructions on the form. If you want IRS to deposit your refund into just one account, use the direct deposit line on your tax form. With split refunds, you have a convenient option for managing your money — sending some of your refund to an account for immediate use and some for future savings — teamed with the speed and safety of direct deposit. Your refund should only be deposited directly into accounts that are in your own name; your spouse’s name or both if it’s a joint account. Whether you file electronically or on paper, direct deposit gives you access to your refund faster than a paper check. Direct deposit also avoids the possibility that your check could be lost or stolen or returned to IRS as undeliverable. Speed, safety and choice — with direct deposit you can have it all.
should not lowball the IRS. If the IRS finds you owe more than you’ve already paid, you will be subject to fines and penalties. A good rule of thumb when estimating is to examine last year’s return. If you did not change jobs, purchase a home or earn substantially more or less money this year, you can base this year’s tax estimate on last year’s bill. • Choose the standard deduction if possible. Many non-homeowners can simply choose the standard deduction as opposed to itemized deductions. Doing so can make it much quicker to file a tax return. In general, if finances are simple and not complicated, a standard deduction is the easiest and best route to take. Everyone would like to spend less on taxes. Fortunately, the tax laws make it easy. You can reduce your taxable income through various deductions, or reduce your tax liability through various credits. V i s i t the IRS Web site at www. irs.gov to learn the standard d e d u c tions.
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The News Reporter | Tax Tips | 16
More last-minute tax tips As tax day rapidly approaches, here’s what you need to do now: Think: bite-sized chunks To alleviate the anxiety and stress of filing your taxes, get started today! Start by organizing your paperwork, establishing a filing system, reviewing all your documents, and then efile! It’s really as simple as that. Skip the tax store Let’s face it – it’s getting a little late in the season to hire a pro or make an appointment at a tax store. And the thing is, especially if your taxes are simple (ie: you claim the standard deduction, as 60 percent of filers do), you don’t need to pay someone to file your taxes! Last year, taxpayers with a 1040 A/EZ spent some $2.5 billion in preparer fees! Save yourself several hundred dollars, and file on time with the help of a software program – likeTurboTax. Take advan-
tage of all the breaks you’re entitled to. One of the more valuable tax credits just so happens to be one of the many credits that Americans forget to claim: the Earned Income Credit. The maximum credit for a household with three or more children is a whopping $5,666. Claim it if you’re eligible; after all, a credit reduces your taxes dollar for dollar. Make contributions to your IRA One of the best ways to save for retirement and reduce your tax liability is with an IRA. The maximum contribution limits is $5000 for those under the age 50; $6000 for those age 50 and over. In most cases, you have until April 18th to make these contributions (even if you’re planning on filing for an extension).
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