Tax Relief for Washington State Mudslide and Flood Victims

Washington State Mudslide

The Internal Revenue Service announced victims of last month’s mudslides and flooding in Washington state will have until Oct. 15 to file their returns and pay any taxes due.

Following this week’s disaster declaration for individual assistance issued by the Federal Emergency Management Agency (FEMA), the IRS said that affected taxpayers in Snohomish County, including the Sauk-Suiattle, Stillaguamish and Tulalip tribes, will receive this and other special tax relief.

The tax relief postpones various tax filing and payment deadlines that occurred starting on March 22, 2014. As a result, affected individuals and businesses will have until Oct. 15, 2014 to file these returns and pay any taxes due. This includes the regular April 15 deadline for filing 2013 individual income tax returns and making tax payments. It also includes the April 15 deadline for making 2013 contributions to an individual retirement account.

Also included, are the April 15, June 16 and Sept. 15 deadlines for making quarterly estimated tax payments. A variety of business tax deadlines are also affected including the April 30 and July 31 deadlines for quarterly payroll and excise tax returns.

The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply. The agency automatically provides this relief to any taxpayer with an IRS address of record located in the disaster area. Taxpayers need not contact the IRS to get this relief.

Beyond the relief provided to taxpayers in the FEMA-designated localities, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. All workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization also qualify for relief. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227.

Individuals and businesses who suffered uninsured or un-reimbursed disaster-related losses can choose to claim them on either last year’s or this year’s return. Claiming these casualty loss deductions on either an original or amended 2013 return will get the taxpayer an earlier refund but waiting to claim them on a 2014 return could result in greater tax savings depending upon other income factors.

In addition, the IRS is waiving late deposit penalties for federal payroll and excise tax deposits normally due on or after March 22 and before April 7 if the deposits are made by April 7, 2014. Details on available relief can be found on the disaster relief page on IRS.gov.

The tax relief is part of a coordinated federal response to the damage caused by mudslides and flooding and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

The IRS is actively monitoring the situation and will provide additional relief if needed.

Net Investment Income Tax

New Tax Rate 3.8% Net Investment Tax

Starting in 2013, some taxpayers may be subject to the Net Investment Income Tax. You may owe this tax if you have income from investments and your income for the year is more than certain limits. Here are four things you should know about this tax:

1. Net Investment Income Tax.  The law requires a tax of 3.8 percent on the lesser of either your net investment income or the amount by which your modified adjusted gross income exceeds a threshold amount based on your filing status.

2. Net investment income.  This amount generally includes income such as:

  • interest
  • dividends
  • capital gains
  • rental and royalty income
  • non-qualified annuities

This list is not all-inclusive. Net investment income normally does not include wages and most self-employment income. It does not include unemployment compensation, Social Security benefits or alimony. Net investment income also does not include any gain on the sale of your main home that you exclude from your income.

After you add up your total investment income, you then subtract your deductions that are properly allocatable to this income. The result is your net investment income. Refer to the instructions for Form 8960, Net Investment Income Tax for more on how to figure your net investment income or MAGI.

3. Income threshold amounts.  You may owe the tax if you have net investment income and your modified adjusted gross income is more than the following amount for your filing status:

Filing Status                            Threshold Amount
Single or Head of household                 $200,000
Married filing jointly                              $250,000
Married filing separately                       $125,000
Qualifying widow(er) with a child       $250,000

4. How to report.  If you owe this tax, you must file Form 8960 with your federal tax return. If you had too little tax withheld or did not pay enough estimated taxes, you may have to pay an estimated tax penalty.
IRS Resources:

Make the Climb!

Enjoy and be motivated with this inspiring article by my guest writer, Marlene Kattaron.

Diga del Cingino Dam Italy

The steeper the mountain, the harder the climb, the better the view from the finishing line. Paula Abdul

The other day I got an email of photos of the Diga del Cingino dam in Italy. Maybe you’ve already seen the pictures—they are fairly amazing. Climbing the nearly vertical wall of this dam is a herd of Ibex. They climb the wall to feed on the moss and lichen that grow there, as well as licking the salt from the rocks.

I looked at the picture and had two varying trains of thought:

-the first thought was, that you can look at an obstacle and view it as impossible or view it as possible—it is completely up to you—you can make the climb if you choose to do so, and no matter how steep, no matter how seemingly impossible the climb, you will be just fine, as long as you treat it as if it is no big deal. So, when you are talking with people that you are hesitant to approach, you need not fear. If the person doesn’t see the big picture, it is no big deal. That person will be the animal at the bottom of the dam, looking up at you having your little moss and salt feast.

-the second thought was—if you don’t see yourself as one of the Ibex on the dam, then guess what? You will be an Ibex at the bottom, looking up, watching everyone else eat the moss and lick the salt, while you stay at the bottom with a growling belly. If you don’t make the climb, I guarantee that someone else will.

ibexdam

There is no time like NOW to make the climb. What are you waiting for? So what if you start the steep climb and slip for a step or two. MAKE THE CLIMB! If you are at the bottom anyway, what do you have to lose by making the climb?

Remember when life’s path is steep to keep your mind even. Horace

Oh, my ways are strange ways and new ways and old ways, and deep ways and steep ways and high ways and low; I’m at home and at ease on a track that I know not, and restless and lost on a road that I know. Henry Lawson

Business versus life; life versus business. I have learned to apply the principles of leading a successful life and incorporate them into my business and I have learned to apply the principles of succeeding in business to succeeding in life. There is separation between personal life and business, yet there is much overlap in how to succeed at any aspect of life that we pursue.

My business relationships in Ignite with my customers and with my teammates and business leaders have been nothing less than amazing and inspiring. As the famous Zig Ziglar says, “You will get all you want in life if you help enough other people get what they want.”

Marlene Kattaron is an Ignite Inc independent associate, part of the Stream Energy marketing team. With Stream Energy, “Energy is Just the Beginning.” Stream Energy offers electricity and natural gas services, as well as Identity Theft Protection, Credit Monitoring Services and 24/7 Tech Support. Stream Energy puts relationships back in business! “Be my friend. Give me your business. And save.”

Marlene Kattaron, Managing Director, Ignite           404-403-2793   kattaron@bellsouth.net

Estimated Tax Payment Tips

taxes made from money

If you don’t have taxes withheld from your pay, or you don’t have enough tax withheld, then you may need to make estimated tax payments. If you’re self-employed you normally have to pay your taxes this way.

Here are six tips you should know about estimated taxes:

1. You should pay estimated taxes in 2014 if you expect to owe $1,000 or more when you file your federal tax return. Special rules apply to farmers and fishermen.

2. Estimate the amount of income you expect to receive for the year to determine the amount of taxes you may owe. Make sure that you take into account any tax deductions and credits that you will be eligible to claim. Life changes during the year, such as a change in marital status or the birth of a child, can affect your taxes.

3. You normally make estimated tax payments four times a year. The dates that apply to most people are April 15, June 16 and Sept. 15 in 2014, and Jan. 15, 2015.

4. You may pay online or by phone. You may also pay by check or money order, or by credit or debit card. If you mail your payments to the IRS, use the payment vouchers that come with Form 1040-ES, Estimated Tax for Individuals.

5. Check out the electronic payment options on IRS.gov. The Electronic Filing Tax Payment System is a free and easy way to make your payments electronically.

6. Use Form 1040-ES and its instructions to figure your estimated taxes.
Additional IRS Resources:

IRS YouTube Videos:

Direct Deposit and Split Accounts for Tax Refunds

Tax-Refund-2

Taxpayers can have their refunds directly deposited when they e-file or by including their account information on their paper tax return..

Banks, mutual funds, brokerage firms and credit unions are all eligible to receive direct deposits. Before making this choice, however, taxpayers should make sure the financial institution accepts direct deposits for the type of account chosen.

Taxpayers also, have the option and flexibility of splitting refund deposits, among two or three different accounts, or financial institutions. For instance, a refund could be split between a savings account, a checking account, or an Individual Retirement Arrangement (IRA). Taxpayers can split their refunds when they e-file or by filing Form 8888, Direct Deposit of Refund to More Than One Account.

A taxpayer’s refund should only be deposited directly into accounts that are in the taxpayer’s own name; the taxpayer’s spouse’s name, or both if it’s a joint account.

Those who choose direct deposit get their refunds sooner, and direct deposit eliminates the chance of a lost, stolen or undeliverable refund.

Home Office Deductions – Two Options

home office

If you work from home, you should learn the rules for how to claim the home office deduction. Starting this year, there is a simpler option to figure the deduction for business use of your home. The new option will save you time because it simplifies how you figure and claim the deduction. It will also make it easier for you to keep records. It does not change the rules for who may claim the deduction.

Here are six facts about the home office deduction.

1. Generally, in order to claim a deduction for a home office, you must use a part of your home exclusively and regularly for business purposes. Also, the part of your home used for business must be:

• your principal place of business, or

• a place where you meet clients or customers in the normal course of business, or

• a separate structure not attached to your home. Examples might include a studio, garage or barn.

2. If you use the actual expense method, the home office deduction includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid could qualify. If you own your home, part of the mortgage interest, taxes and utilities you paid could qualify. The amount you can deduct usually depends on the percentage of your home used for business.

3. Beginning with 2013 tax returns, you may be able to use the simplified option to claim the home office deduction instead of claiming actual expenses. Under this method, you multiply the allowable square footage of your office by a prescribed rate of $5. The maximum footage allowed is 300 square feet. The deduction limit using this method is $1,500 per year.

4. If your gross income from the business use of your home is less than your expenses, the deduction for some expenses may be limited.

5. If you are self-employed and choose the actual expense method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You claim your deduction on Schedule C, Profit or Loss From Business, if you use either the simplified or actual expense method. See the Schedule C instructions for how to report your deduction.

6. If you are an employee, you must meet additional rules to claim the deduction. For example, in addition to the above tests, your business use must also be for your employer’s convenience.

For more on this topic, see Publication 587, Business Use of Your Home. It’s available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Additional IRS References:

Tips for Self-Employment

tip of the day

If you are an independent contractor or run your own business, there are a few basic things to know when it comes to your federal tax return. Here are six tips you should know about income from self-employment:

 

  • Self-employment income can include income you received for part-time work. This is in addition to income from your regular job.
  • You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040.
  • You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. Make sure to file the schedule with your tax return.
  • You may need to make estimated tax payments. People typically make these payments on income that is not subject to withholding. You may be charged a penalty if you do not pay enough taxes throughout the year.
  • You can deduct some expenses you paid to run your trade or business. You can deduct most business expenses in full, but some must be ’capitalized.’ This means you can deduct a portion of the expense each year over a period of years.
  • You can deduct business costs only if they are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.Visit the Small Business and Self-Employed Tax Center on IRS.gov for all your federal tax needs. You can also get IRS tax forms and publications on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

    Additional IRS Resources:
  • Form 1040-ES, Estimated Tax for Individuals
  • Publication 505, Tax Withholding and Estimated Tax
  • Publication 334, Tax Guide for Small Business
  • Publication 535, Business Expenses

IRS YouTube Videos:

Estimated Tax Payments – English | Spanish | ASL

IRS Podcast:

Estimated Tax Payments – English | Spanish

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