Should You Make Estimated Tax Payments?

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

If you’re required to make quarterly estimated tax payments this year, the first one is due as the same date of the tax filing deadline.

Failing to pay estimates, or not paying enough, may lead to penalties. Here are three things you need to consider:

Do you need to make estimates? If you operate your own business, or receive alimony, investment, or other income that’s not subject to withholding, you may have to pay the tax due in installments. Each estimated tax installment is a partial prepayment of the total amount you expect to owe for next year. You make the payment yourself, typically four times a year.

How much do you need to pay? To avoid penalties, your estimated payments must equal 90% of your 2016 tax or 100% of the tax on your 2015 return (110% if your adjusted gross income was over $150,000).

Exceptions. There are exceptions to the general rule. For instance, say you anticipate the balance due on your 2016 tax return will be less than $1,000 after subtracting withholding and credits. In this case, you can skip the estimated payments.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

Should I donate a vacant land that went down in value?

Here’s a tax question, I got from one of my clients:

Should I donate a vacant land that went down in value?

Here are the facts of the case:
Client bought a vacant land in Florida 10 years ago for $35,000. It’s now worth $5K.

She is feeling charitable and would like to give the vacant land to her favorite charity.

So what do we do?

If she donates her vacant lot, she can deduct the land’s $5k market value as charitable deduction. That is good. However, we can do better.

Here’s the LowerMyTaxNow strategy:

Sell your lot to recognize the $30,000 capital loss ($35K cost less $5K market value). You can deduct $3K of capital loss every year or you can offset these losses with any future capital gains.

Afterwards, you can donate the $5K cash to your favorite charity.
Whoolah! Not only you gave the same $5k value to your favorite charity, but you were able to recognize the loss from the sale of the vacant land.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

Is It Advisable For My Kid To Fund a Roth IRA?

Here’s a tax question, I got from one of my clients:
If my kid works part-time, do you recommend funding a Roth IRA?
Hey, that is great question! And it deserves a great answer. Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
If you have a kid who works part-time, encourage your kid to fund a Roth IRA.
You might be thinking, what’s the big deal about a Roth IRA?
We’ll, it’s one of the most powerful retirement vehicle that you can take advantage of.
The contribution is not tax deductible, however, it grows tax-free and when you take out the money at age 60, it’s all tax-free!

What is the income requirement to fund it then?
You only need to have a W-2 or NET business income. Age is irrelevant.
So for 2015 and 2016, your kid can contribute the lesser of: (1) W-2/Net business income or (2) $5,500.

By funding this consistently, your kid can potentially accumulate quite a bit of money by retirement age. However, your kid might not be willing to put in the $5,500 even when they have enough earnings to do so. So just be satisfied if you can convince your child to contribute at least a meaningful amount each year. Remember, if you are so inclined, you can make the Roth IRA contribution for your child.

Here’s what can happen if your 15-year-old kid contributes the following amounts:
(Note that it will be worth different values depending on the amounts contributed & annual return)

Annual Contribution Value when child is 60 years old
For 5 Years 3% 5%

$1K $ 28K $84K
$1.5K $ 40K $127K
$2.5K $ 67K $212K

Wow! You get the idea right? With just small annual contributions for five years, Roth IRAs can be worth eye-popping amounts by the time your kid approaches retirement age. That is the power of starting early!

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

3 Tax Scams That You Need To Watch Out For

3 Tax Scams That You Need To Watch Out For
Have you been a victim of a tax scam? No? Well, that’s great!
Did you know that during tax time, tax scams usually go up.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Today, you will learn 3 tax scams that you need to watch out for.
Here goes:
The first one is identity theft.
Scammers will use your social security number and personal information to file your tax return and claim a fraudulent refund.
If you get an IRS notice informing you that more than one return was filed in your name and you received wages from an unknown employer those are the signs that you have been victimized.
If you believe your personal information has been stolen and used for tax purposes, you should immediately contact the IRS Identity Protection Specialized Unit. Go to www.irs.gov and visit the special identity theft page on the IRS website.
The second one is phone scams.
Did someone call your home number and pretended to be an IRS agent and threatened you with police arrest, deportation and license revocation if you don’t pay your outstanding IRS bill? Let me tell you, it happened to my associates and my wife. They freaked out!

Just so you know, IRS usually corresponds through mails only. They do not call for any outstanding bills. And they never ask for credit or debit card information over the telephone and they never requests immediate payment over the telephone and will not take enforcement action.
So when you receive this threatening phone call, please hang up or call IRS immediately.
Lastly, phishing. This is the use of unsolicited email about a bill or refund or fake website appearing to be from the IRS. Please do not click on one claiming to be from the IRS. Remember – IRS NEVER initiates a contact by email requesting your personal and financial information. Report such email immediately to phishing@irs.gov.
There you have it. So for this coming tax season, watch out for these top three scams. Be careful when viewing e-mails or receiving telephone calls because scams can take on many sophisticated forms. Keep your personal information secured by protecting your computers and only provide your Social Security number when absolutely necessary.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly video blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow

To File, or Not to File Separately, That is the Question

Do you know how some high powered people or celebrities file their taxes?
If you say, filing jointly as married couple, then that is an educated guess.
However, for some they choose to file separately. Why? Let’s find out.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Today, you will learn when to file or not to file separately.
Are you ready? Okay.
If you are married, you can elect to file separately at the end of the year.
What are the disadvantages of filing separately?
There’s a lot:
Unfavorable tax rates
You lose various credits
You lose education benefits
Greater chances that your social security will be taxable
IRA’s deductions and contributions phases out at $10,000 of your income
And lastly, your rental losses will be limited to $12,500
So with these disadvantages,
you might be thinking, why do people file separately?
Two reasons: Number one: you might pay less tax by filing separately.
For example, if your spouse has medical expenses or employee unreimbursed expenses,
you might pay less, since these deductions will be limited by the income of your spouse.
Number two: And this is a big one! No joint liability!
If you sign a joint return, you and your spouse is responsible for the payment of the tax.
If you file separately, then you are not responsible for reporting or paying taxes on items related to your spouse.
There you have it.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

How to Maximize the Dependency Deductions?

Do you have people that you support? Do you know that if you meet certain tests, they may be claimed as your dependent. Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Today, we will talk about how to maximize your dependency deductions.
Here are 3 things you need to know, number 1: Deductions and income limitation.
Each dependent will reduce your income by $4,000 on your 2015 tax return. However, you might lose part of that deduction if your income is more than $309K if you are married or more than $258K if you are single filer.
Number 2: Who can be considered a dependent? A dependent is someone you provided more than half of their support; more than 50%. And they are either a qualifying child or a qualifying relative. You need to take advantage of both classifications in order to claim the deduction.
A qualifying child is someone related to you, lived with you, under 19 or a full-time student under 24 or it can be any age if permanently disabled
A qualifying relative is a dependent that either lives with you all year or related to you and they must have income that is less than $4,000.
So you can claim any person not related to you as long as they live with you the entire year and made less than $4,000. While any person related to you like your parents or children does not necessarily be living with you, you just need to provide more than 50% of their support and their income needs to be less than $4,000.
Keep in mind that for your parents that receive social security benefits only, those benefits will be taxed as “0” and would not be considered as income. Make sure you take advantage of both classifications in order to claim the deduction.
Okay. We’re almost on the finish line, here’s number 3: Who can’t be claimed
We’ll, your spouse is never your dependent. In addition, you cannot claim a married person if that person files a joint return with a spouse. Also, a dependent must be a U.S. citizen, resident alien, a resident of Canada or Mexico for part of the year.
Wow! You made it!
For a somewhat simple topic, claiming the deduction for a dependent can be quite complex.
You will want to get it right though, because being able to claim someone as a dependent can lead to other tax benefits, including head of the household filing status, child tax credit, education credits, and the dependent care credit.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly video blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

Three Tips to Start the Tax Filing Season

Guess what? It’s that time of the year again. Nope, I’m not talking about Christmas. I’m talking about one of your favorite things to do: filing your taxes.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Today, you will learn three tips to start your tax filing season. Are you ready?
Number 1. Check whether your kids need to file a 2015 tax return. They’ll need to file if wages exceeded $6,300, net business income was over $400, and if interest or dividend exceeded $1,050. However, when income includes both wages and investment income, other thresholds apply.
Number 2. Consider whether you’ll contribute to a Roth or traditional IRA. Since you have until April 18 to make a 2015 contribution, you can schedule an amount to set aside from each paycheck for the next few months. The maximum contribution for 2015 is the lesser of your earned income or $5,500 ($6,500 when you’re age 50 or older). When funding the IRAs make sure you indicate that this is for the 2015 tax year.
Number 3. Do you need to file a gift tax return?
For 2015, you may need to file a return if you gave gifts totaling $14,000 to someone other than your spouse. Some gifts, such as direct payments of medical bills or tuition, are not subject to gift tax. They are due at the same time as your federal income tax return. There you have it. So just make sure you keep in mind these three tips once you start filing your taxes.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

Number ONE Secret on How to become a Millionaire

Do you know the number one secret on how to become a millionaire?
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
The number one secret on how to become a millionaire
is to practice “paying yourself first”.
That means, you pay yourself first by automatically funding a retirement account
and transferring money in your savings account.
That way, before you even have access to your accounts, you already took steps in securing your financial future.
This is a perfect segue to discuss retirement plans.So for 2016, you can contribute $18,000 to your 401(k), plus another $6,000, if your 50 years old or older.
Taking full advantage of allowable contributions and any employer matching is still a good idea. Since contributions you make to your retirement plan reduce your taxable income and also help you build your retirement portfolio.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

Three positive steps to financial well-being

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
While you’re gathering information to prepare your 2015 tax return, set aside time for a financial review.
Here are steps to get started.
● Compile a year-end list of your assets and debts and compare the list to last year. Are you gaining or losing ground? What actions can you take to improve your financial situation in 2016? Should you start paying off your credit card debt or adding an extra principal payment on your mortgage payment?
● Review your insurance. Do you have disability insurance to replace take-home pay if you become incapacitated? What about life insurance – will the benefit provide enough cash to pay your family’s expenses in the event something happens to you or your spouse? Is your home protected with replacement value property insurance? What about insurance for automobile accidents or lawsuits?
● Update your will and estate plan. What changed during 2015? Did you marry? Divorce? Have a child? Move to a new state? Receive an inheritance? All of these events can affect your planning. This year, you can leave up to $5,450,000 to your heirs with no federal estate tax liability. But that doesn’t mean you can ignore estate planning, which includes expressing your wishes for who will make decisions for you in times of emergencies as well as who will receive your assets.
● Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

Does your business need to file Form 1099?

Does your business need to file Form 1099?
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Forms 1099 are due to recipients by February 1, 2016. You may be most familiar with Form 1099-MISC, which you use when your business makes payment over $600 for services to nonemployees. Reportable payments can include fees for services paid to independent contractors, such as consultants, lawyers, cleaning services, landlords and property managers. Generally, you don’t report fees paid to corporations, but there are exceptions (payments to lawyers, for example). Lastly, you are required to issue a 1099 to an LLC unless they are tax as a corporation.
If you like to learn more, click the link lowermytaxnow.com and subscribe to my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com