California and Tennessee to Receive Tax Relief Following Disasters

California and Tennessee have been plagued by natural disasters in recent weeks. Californians have been affected by massive wildfires, while Tennesseeans have struggled with storm damage. In light of this, the federal government is offering affected citizens some tax relief options.

California wildfire victims residing in the counties of Lassen, Placer, Plumas, or Nevada, have until November 15th, 2021 to file individual and business returns or payments. This includes quarterly tax payments, excise tax returns, and quarterly payroll. November 15th will also serve as the new deadline for those who had received an extension on their 2020 returns.

Penalties on payments that were due between July 14th and July 29th of 2021 will also be forgiven if the payments were made by July 29.

Tennessee residents or business owners who were impacted by storm damage in Houston, Dickson, Humphreys, or Hickman county also qualify for tax relief. Those who had received an extension to their 2020 returns will now have until January 3rd, 2022 to file. That is also the new deadline for the quarterly tax payments that would’ve normally been due in September of 2021.

Penalties on payments that were due between August 21st and September 7th of 2021 will be dropped if the payments were made by September 7th of 2021.

If you’re a victim of the California fires or Tennessee storms and you receive a notice from the IRS that you’re being penalized for late filing or late payment but you believe you qualify for the tax extensions, you can contact the number on the notice. Explain your situation and they’ll be able to help you determine if you are eligible and if you are, they can remove the penalty from your file.

The IRS is making every attempt to automatically identify taxpayers who reside in the areas covered by the disaster extensions. When they identify these people, they apply the filing and payment relief options to their accounts. This means, that if you live in the affected areas mentioned, you shouldn’t need to contact the IRS to receive your tax extension.

If however, you are a victim of the fires or storm damage that lives outside of the mentioned counties, you will need to contact the IRS at (866) 562-5227 to request the tax relief.

This article was originally published on JBowmanAccountant.net

Tax Breaks for Homeowners

While there are many opportunities to create financial wealth and safety in America, few are as powerful as owning a home. Even with decades of mortgage payments, the relative size of those payments usually declines over time as wages rise but the payments stay flat. Also, home values tend to go up over time, representing another way to secure wealth in a home.

Once a mortgage is paid off, families own their own homes and just have to pay taxes and maintenance, seriously freeing their regular income from one of life’s biggest expenses. The advantages don’t stop there. Multiple law enforcement agencies and municipal governments have learned that crime goes way down in communities where at least a third of the residents own their homes as compared to renting.

Buying a home isn’t cheap. In fact, it’s often the biggest single expense most families will make in their lifetimes. Fortunately, there are many tax breaks homeowners can use to make things more affordable.

While there are many opportunities to create financial wealth and safety in America, few are as powerful as owning a home. Even with decades of mortgage payments, the relative size of those payments usually declines over time as wages rise but the payments stay flat. Also, home values tend to go up over time, representing another way to secure wealth in a home.

Once a mortgage is paid off, families own their own homes and just have to pay taxes and maintenance, seriously freeing their regular income from one of life’s biggest expenses. The advantages don’t stop there. Multiple law enforcement agencies and municipal governments have learned that crime goes way down in communities where at least a third of the residents own their homes as compared to renting.

Buying a home isn’t cheap. In fact, it’s often the biggest single expense most families will make in their lifetimes. Fortunately, there are many tax breaks homeowners can use to make things more affordable.

1. Capital Gains: If you sell your home and profit from it, then capital gains taxes might apply. However, if it was your primary residence, you might be able to keep capital gains without them getting taxed.
2. Discount Points: When you get a mortgage, you might get to buy discount points that lower the interest rate applied to the loan. Points you buy to lower the interest rate are tax-deductible.
3. Home Equity Loan Interest: This is just like having a second mortgage. You can deduct the interest you pay on a home equity loan if you took the funds for home improvements.
4. Home Office Costs: The actual details are up to the IRS on this one, but home office space might get you tax breaks.
5. Mortgage Insurance: Also known as PMI or private mortgage insurance, it’s there to give your lender protection if you can’t keep up with mortgage payments. You can itemize the cost of this insurance.
6. Mortgage Interest: The mortgage interest deduction lets you lower taxable income if you do an itemized deduction.
7. Necessary Improvements: The scope of what is ‘necessary’ is up to the IRS, unfortunately, but certain improvements can qualify as tax deductions.
8. Property Taxes: These are often applied at the state and municipal levels. Depending on how you file, you can deduct $5,000 to $10,000 from your federal taxes.

This article was originally published on JBowmanAccountant.net

Four Purchases That Should Never be Made With a Debit Card

Although debit cards are extremely convenient, they aren’t always the right choice for payments. Under some circumstances, it’s actually more beneficial to use a credit card. Here are four things that should always be paid for with a credit card instead of a debit card.

Furniture and Appliances

Large home purchases, such as furniture and appliances, should always be made with a credit card. These purchases are large enough that a mistake by the delivery team or the manufacturer can cost buyers thousands of dollars. With a credit card, it’s possible to dispute the charges, even if the seller isn’t willing to arrange a refund directly. In addition, the size of these purchases means that even 1-2 percent cashback will add up to a considerable sum of money.

Car Rentals

When renting a car, it’s almost imperative to use a credit card. Even if the rental company will allow renters to pay with a debit card, they should expect to pay a large additional fee in order to do so. Rental car companies also tend to run credit checks on renters who pay with debit cards. This, in turn, can cause damage to the renter’s credit score by adding an unnecessary hard inquiry. To avoid this hassle and expense, anyone renting a car should be prepared to pay with a credit card.

Recurring Payments

People with memberships and subscriptions often make the mistake of billing their bank accounts directly through their debit cards. While there’s little risk of losing money this way, credit card rewards on these recurring payments can add up over time to significant amounts. Points, miles, and cashback rewards can all be built on recurring payments with no extra effort. Given this fact, it rarely makes sense to make these recurring payments using anything other than a credit card.

Online Purchases

Unfortunately, online scams are everywhere these days. Sellers who bait and switch their buyers or fail to deliver at all are quite common, even on major online platforms. Credit cards offer a degree of protection against this kind of behavior by allowing buyers to dispute charges and get their money back.

While debit cards certainly have their place, they aren’t for everything. These four types of purchases are generally best made with credit cards, as debit cards introduce higher risks or lower rewards in these cases.

This article was originally published on JBowmanAccountant.org

Preparing for Tax Season

Tax season can be a stressful, but rewarding time, depending on your work and financial situation.  With tax time right around the corner, you’re probably anticipating receiving your W-2 from your employer in the mail, and any other necessary documents, within the next few weeks.  Today, your taxes can be managed in numerous ways from a personal accountant, a nationwide accounting service, or even, an app on your phone that doesn’t require a visit to an office; the way you choose to have your taxes done is really based on your personal preference.  One thing, however, that everyone has in common regardless of how your taxes are done, is how you should prepare for tax time to make it easy on yourself, or your tax professional. Here are a few key ways to better prepare for tax time:

Figure Out Your Preference

As previously mentioned, today, your taxes can be done in various ways.  The first step to preparing for tax time, is figuring out how, and who, you want to do your taxes.  Do you plan on doing them yourself? Or would you prefer to have them done by an accountant or a tax-preparation service?  Keep a few things in mind. If you plan to do them yourself, you want to make sure you have all of the right information and know about the deductions that you’re entitled to.  If you plan on hiring an accountant or tax-preparation service, make sure you do the necessary research so you know who you’re working with.

Get Your Forms in Order

Everyone has a different financial situation, and there are multiple tax forms one will need depending on their situation.  To get yourself best prepared, figure out which forms are necessary for you during tax time, and get them in order. If you’re unsure, you can always take a look at the IRS website or consult a professional you may know.  

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This article was originally published on jbowmanaccountant.info 

Tax Breaks for First-Time Home Buyers

Buying your first home is an expensive endeavor. Yet there are a number of tax credits that first-time homebuyers can take advantage of. Sometimes congress changes the available tax breaks or adjusts certain aspects of the law. Therefore, you should keep an eye on the tax law when you get ready to file your taxes. Below are some of the most popular tax credits for first-time homebuyers.

Points Deduction

If you paid points when getting your mortgage, you may be eligible for a deduction. In order to take advantage of this deduction, your settlement contract has to make reference to the points. Plus you will have to itemize when filing your taxes instead of using the standard deduction.

Property Tax Deductions

Property taxes can be deducted when you itemize on your tax return. First-time homebuyers should definitely take advantage of this deduction, but it’s not limited to first-time homebuyers. In order to claim this deduction, the property should be your main residence or a vacation home—not a business property.

Mortgage Interest Credit

Claiming a mortgage interest credit can lower the amount of taxes you owe. If you want to take advantage of this credit, you have to make sure you received a Mortgage Credit Certificate. The certificate is usually sent to you by your local government when you first receive your mortgage, and it lists how much interest the credit is worth. If you take advantage of the mortgage interest credit and the mortgage interest deduction, the credit will be reduced based on how much of a deduction you claim.

Mortgage Interest Deduction

A home mortgage interest deduction is one of the most popular tax credits for new homeowners. When it comes time to file your taxes, the bank or loan provider will mail you a tax form called Form 1098. The form details how much you paid in interest for the previous tax year. New homeowners should definitely take advantage of this deduction since mortgage payments have a higher percentage of interest than principal in the beginning. Keep in mind that in order to deduct home mortgage interest, you will have to itemize. For many homeowners, itemized deductions can add up to be larger than the standard deduction.

IRA Withdrawals

Typically when you make withdrawals from your IRA before you are 59 ½ years old you face a 10% penalty. However, when you use the withdrawals for a home purchase this penalty can be waived. The caveat is that you cannot withdraw more than $10,000.

Learn More About These 5 Popular Tax Credits

There are a number of tax credits that you need to be aware of in order to be able to retain more of your income in spite of paying taxes. Such tax credits exist mainly for middle and low-income people and help you to keep most of your annual income from going into paying excessive taxes.

When you are able to identify tax credits that apply to you in particular, then the process of filing taxes at the end of the financial year is likely to become a whole lot easier than usual.

Earned Income Tax Credit

The first credit to consider is the Earned Income Tax Credit or EITC which was established in 1975. It is phased in accordance with filing status and is based on investment income, earned income, and gross income. In order to qualify for this tax credit, you need to be younger than sixty-five years and older than twenty-five years. Learn more here.

American Opportunity Tax Credit

The American Opportunity Tax Credit has been designed to help meet the expenses associated with higher education. The full credit will be available to you if your annual gross income is $80,000 or $160,000 if you have a partner.

Lifetime Learning Credit

The Lifetime Learning Credit is meant to meet expenses that are commonly associated with post-secondary education. It is not just applicable for the first four years of secondary education but rather any stage of post-secondary education. The credit is also made available to you even if you are just pursuing a certification and not a degree.

Child and Dependent Care Credit

As the name suggests, this is a tax credit that applies to you if you are a parent and wish to defray costs associated with daycare or babysitting. You can use this credit if you are a single parent who has a dependent child who is under 13 years of age and you need to be away to look for work or be at work.

Savers Tax Credit

If you are a retired professional then this tax credit applies to you. If you make a contribution to retirement plans in the course of your professional life, then you can also use this tax credit quite easily.

By keeping the above tax credit options in mind, you will be able to save quite a bit in taxes and retain more of your hard earned income.

Taxes: DIY or HIRE

Tax season is right around the corner. If you remember last year’s season, you may have been left with frustrations, questions, and concerns. Many people are beginning to wonder if it’s worth hiring an accountant, or if they should file their taxes themselves using programs such as Turbotax. Filing taxes is an important, yet very tricky duty. But I’m here to tell you that there is no right or wrong answer; the choice is simply yours. The ultimate decision simply comes down to you and your preference for filing, and no one can tell you which is the better choice. However, there are some helpful things to think about when the time for filing comes along.
Before you begin the tax process you’ll want to ask yourself is, “How organized are you?” Receipts and records of transactions are critical elements of tax filing. Whether you hire a professional, or do your taxes yourself, you will need these records. Here are some things to consider when deciding how to file your taxes this year.
DIY
Whether or not you did your taxes yourself last year, one of the things you’ll need to consider is has your work life or personal life changed in a considerable way. If you haven’t spent a lot of money on investments or big charitable donations, then it may be a good idea to file your taxes on your own. Another thing to consider is whether or not you understand the numbers and vocabulary that come with taxes. If you understand tax laws and have the time and patience to look up questions of concern, then you can file your taxes on your own. Filing taxes is also a good idea if you’re filing alone. Without any dependents, the filing process becomes less challenging, and may save you money. For example, if your total income is less than $50,000, you may qualify for free filing. The simpler your transactions throughout the past year were, the easier it will be for you to file your taxes on your own.
HIRE
Hiring a tax professional comes with many benefits. For one, you’ll know that you won’t make any important legal mistakes when filing. Typically, if you own a business or make over $200,000 per year, you will want to hire a professional to file your taxes. The reason is because the more money coming in, the more confusing deductions become. Hiring a professional is also a great idea because you may qualify for certain deductions or exemptions that a professional would be able to find for you.
If you’ve had any major life changes such as buying a property, getting a new job, or getting married, you will probably want to consider hiring a professional. First of all, it will take the stress off of you by making sure everything is filed correctly. Filing taxes after a life change can become very challenging. Second, it can take a lot more time to file, which can become frustrating. With a professional at hand, you will be able to get a thorough explanation and understanding of any questions or concerns you may have.

Tax Definitions and Explanations

Taxes are complicated. The language makes them incredibly difficult to understand and therefore filing taxes can be very frustrating and confusing. There are some common tax terms that you have probably seen before but you may not know exactly what they mean. Here is a list of tax terms that you should familiarize yourself, and hopefully you next time you file your taxes the process will be a little less irritating.

Tax Language: Definitions and Explanations from John J. Bowman, Jr. Accountant on Vimeo.

Tax Language: Definitions and Explanations

Tax Language: Definitions and Explanations from John J. Bowman, Jr. Accountant on Vimeo.

Unusual Taxes: You Won’t Believe These Are Real!

Over the years there have been some incredible strange and unusual taxes. These taxes were implemented for a wider range of reasons, including collection revenue and promoting social change. I recently read through this article, which lists some interesting taxes throughout history, and I would like to share some of my favorites below.

• In Ancient Egypt, cooking oil was taxed. People actually had to buy their taxed cooking oil from the Pharaoh’s monopoly and were prohibited from reusing previously purchased oil.

• In 1705, Russian Emperor Peter the Great placed a tax on beards. He hoped the tax would force men to adopt the clean-shaven look that was common in Western Europe.

• Japan imposed a tax on whiskey that was based on the percentage of alcohol by volume. To avoid the tax, Japanese whiskey manufacturers would dilute their product with water to avoid the tax. European whiskey manufacturers, however were prohibited from doing diluting their whiskey, giving Japanese whiskey an advantage in Japan.

• Oliver Cromwell placed a tax on Royalist, who were his political opponents. The tax took one tenth of their property, and the money raised was then used to fund activities that were aimed against the Royalists.

• England placed a tax on fireplaces back in 1660. In response to the tax, people began covering their fireplaces with bricks to conceal them and avoid paying the tax.

• In 1969, England implemented a window tax, which taxed houses based on the number of windows they had. To avoid the tax, houses were constructed with very few windows. This led to health problems and ultimately the repeal of the tax in 1851.

• Pittsburgh has a 5% amusement tax on anything that offers entertainment or allows people to engage in or enjoy entertainment.

• In 2005, Tennessee began requiring drug dealers to anonymously pay taxes on any illegal substances they sold.

• In California, there is a 33% tax on fresh fruit bought through a vending machine.

• In New Mexico, people over the age of 100 are tax-exempt, but only if they are not dependents.

• In Colorado, essential food items are tax-free. But straws and cup lids are subject to sales tax because they are considered to be nonessential food items.

For more unusual and weird taxes, check out this article here.