Prepare Now for Filing Your Personal Taxes

Getting ready to file your personal income taxes can be a daunting task of collecting information. But don’t worry, the pros at Donohoo Accounting Services are here to help! The information required to file your income taxes neatly falls into four categories: Your personal information, dependents’ information, income sources and deductions.

Your Personal Information

While most people may have this information ready at-hand for other purposes, others may have to locate it. Either way, you will need it to file your federal, state and local income taxes. Be sure to have your Social Security number or tax ID number, as well as the full name and Social Security number or tax ID number for your spouse if you are married. If you have this information in written or printed form, be sure to shred the document after your tax preparation for security purposes. Professional accountants take very good care to do this.

Dependent Information

You will need the full names of your children or dependents along with their Social Security numbers or tax ID numbers. Having either their Social Security cards or their names and numbers in written or printed form may make filing easier for your tax preparer. However, as mentioned above, be sure to shred the document after your tax preparation for identity security purposes.

Income Sources

This is where collecting income tax information starts to get tricky, but you can do this!

W-2 Forms –If you and your spouse work a regular full-time or part-time job, your employer will issue a W-2 Form that shows your earnings and tax deductions for the year. Some employers mail W-2 Forms to their employees while others provide access to an electronic document online that you can download and print. Either way, secure a paper copy of your W-2 Forms for yourself and for your spouse.

1099 Forms –Companies issue this form to contracted workers who earn more than $600 within one tax year. Additionally, you may receive a 1099 Form if you received income from non-work sources such as investments, rental income, prior years’ state and local income tax refunds, lottery or gambling winnings, unemployment compensation or retirement benefits. In addition to the 1099 Form, you may be required to provide additional documentation for income earned outside of your primary job. Your tax professional can provide details.

Deductions

Although this area of tax filing seems complicated to most people, taking deductions can reduce your tax liability and may increase the likelihood of your getting an income tax refund. More than a dozen kinds of income tax deductions can be taken, but the most popular deductions are for qualified charitable contributions, home mortgage interest, educational expenses and medical expenses. While you may receive year-end statements from the institutions that received your contributions or payments, consult with your tax professional for details about the kinds of records you need provide when claiming deductions.

To help you find the most deductions and keep your personal information secure, contact Donohoo Accounting Services at 513-528-3982 for a free consultation. We have servedand earned the trust of individuals and small businesses throughout the Greater Cincinnati area for more than 20 years.

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Get Your Money in Order for the New Year

This year is quickly coming to a close. Get ahead of the game and get your money in order for the new year. Don’t know where to begin? No worries! Here are some helpful tips.

Get Organized

Organize Concept Metal Letterpress Word in Drawer

You can file taxes after the new year, so now’s a good time to get all your ducks in a row. In January and early February, you’ll be receiving important documents in the mail including your W2, mortgage interest statement (1098), or student loan interest statement (1098-E.)Most companies, by law, have until January 31 to mail statements, so keep an eye out.

Designate a single location where you’ll keep these documents so they are easily accessible when you’re ready to file taxes. You can use a folder, drawer, box or other container. Put a large “taxes” label on it and use the container for tax-related documents only, not other mail or bills. But you may want to keepit near where you sort mail, so you can immediately put the documents in their home.

Then start gathering other items you’ll need for filing taxes, including charitable contributionand expense receipts. Qualified expenses depend on your situation, but could include expenses related to childcare, medical, job (mileage, supplies, relocation) and education. Donohoo Accounting Services can help you navigate the complicated tax structure. In addition to income tax preparation, we handle payroll tax prep, tax levies and liens, back taxes, end tax penalties, estate tax return preparationand more.

Make Year-End Charitable Contributions

Many charities do a final fundraising push at the end of the year, so you’ll probably receive solicitations asking for support. If you want to help non-profit organizations while also possibly reducing your taxable income, make your donations by December 31. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the yearwill count in that year – even if the credit card bill isn’t paid until later. You’ll want to make sure the charity is eligible. Many times, the charity will note its “501c3” status, which is IRS speak for tax-exempt. You can also use the IRS Tax Exempt Organization Search.

Take an Assessment of Where You Stand Financially

Magnifying glass showing assessment word on grey background

Now’s a good time to take a hard look at your income, debt, expenses, retirement funds, college and emergency savings. Are you on track to meet financial goals? If yes – great! If no – why are you falling short? To properly move forward into the next year, you need a realistic picture of where you are now. Put pen to paper and write down all the numbers. It helps to see everything in black and white.

Make a Financial New Year’s Resolution (Or Better Yet – Create APlan You’ll Stick With All Year)

Once you know where you stand currently, you can create a plan for the upcoming year. Perhaps you want an emergency savings fund. You never know when the furnace is going to go out, someone in your family has a medical issue or there’s a company layoff. Experts say you should have enough emergency savings to cover three to sixth months of expenses. Maybe you have all your financial bases covered but want to take an exotic vacation? Set the goal, create a plan and start saving for that overseas beach trip. Although it’s a busy holiday season, set aside time to get your money in order for the new year. Once you’re ready to file taxes, turn to Donohoo Accounting Services, locally owned and operated by Cincinnati native, Duane Donohoo.

What Qualifies As A Donation On Your Taxes

The IRS defines a charitable contribution as “a donation or gift to, or for the use of, a qualified organization.” You must abide by certain rules to claim charitable donations on your taxes legitimately. Do you know the tips for handling donations on your taxes?

 

You must abide by certain rules to claim charitable donations on your taxes legitimately.
You must abide by certain rules to claim charitable donations on your taxes legitimately.

 

Charitable Contributions what Are They?

Donations include property such as vehicles, household items, clothing, land and cash contributions.  You can only deduct the fair market value (FMV) of any property you donate.

How Do You Determine The Fair Market Value?

Fair market value includes donations of noncash property of items like clothes, household items, land and cars additionally stocks may qualify. The FMV comes down to the price the item you are donating and how much it would sell for on the open market.

Do Your Expenses Qualify as a Charitable Tax Deductions?

You can claim a tax deduction for expenses you acquire:

  • To cover a live-in student who is sponsored by a qualified organization.
  • Out of pocket while serving as a volunteer for a qualified organization.

For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.

 

For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.
For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.

 

Which Organizations Qualify to Receive Charitable Contributions?

The government allows the following types of establishments qualified to take tax-deductible donations:

  • Religious (such as churches, mosques, synagogues and temples)
  • Literary
  • Educational (such as nonprofit schools)
  • Charitable (such as American Red Cross, Boys and Girls Club of America, Goodwill, Salvation Army and United Way)
  • Those working to prevent cruelty to children or animals
  • Scientific
  • Federal, state and local governments (for contributions intended for public purposes)

These Charitable Contributions Are Not Tax Deductible?

As a general rule, donations to individuals, political organizations and candidates for public office are not tax deductible. The same goes for gifts of money or property given to:

  • Homeowners associations
  • Sports clubs
  • Chambers of commerce
  • Civic leagues
  • Social clubs
  • Labor unions
  • Civic leagues

How Can I Be Sure I’m Donating to a Tax-Exempt Organization?

The easiest way to confirm that you are donating to a tax-exempt organization is to ask the organization directly for proof of their tax-exempt status. You also can search for charities using the Exempt Organizations Select Check tool or confirm tax-exempt status by calling the IRS at (877) 829-5500.

Cash Donations Receipts To Keep

If you donate by check, cash or some other monetary gift, you must provide written communication such as a bank record, payroll deduction records or written acknowledgement from the tax-exempt organization with your tax return. This written proof must include:

  • The name of the organization.
  • The date you made the contribution.
  • The amount of your contribution.

 

The amount of your contribution.
The amount of your contribution.

 

If you still have questions about what is a taxable donation or what constitutes a taxable donation please contact Donohoo Accounting at 513 528 3982.  We specialize in helping small businesses with all you taxable needs.

Are Your Business Receipts Audit Ready?

Do you often ignore or say too quickly “No” when asked whether you want a receipt?  Not small-business owners. Knowledgeable business owners just know how to keep receipts. If they don’t, their tax return could be at risk. The question is: Are your business receipts audit ready?

  1. TAKE NOTICE

The first mindset to get into (especially if you’re trying to prepare your receipts for taxes) is creating a tiny note of the business purpose on the receipt. Whether or not you inscribe directly or put aside time at the top of the day, week, or once a large amount of buying has been completed (say at the end of a business trip for example), you’ll need the purchases to be recent enough in your mind that you will remember to label them properly.

Be sure that you create the note because this one thing which will permit you to classify the expense later. Merely writing “lunch” might not be enough to jog your memory if you’re audited a year or two later.

  1. CLASSIFY

Now that you’ve taken note of all these numbers, the next step is following and organizing it, so you can put the receipts into specific classifications. This will make tax time a breeze and permit you to refer back to any receipts without having to look through tons of files.

Here are some samples of common classifications for tax-deductible purchases:

  • Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance.

 

Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance
Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance.

 

  • Travel: there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses.

 

 there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses
there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses.

 

  • Entertainment and Meals: These items may be examined thoroughly by the IRS so be sure these items get listed correctly such as from a business trip.

 

  • Legal and Professional Fees: attorney’s fees, accountant’s fees, other professional consultants’ fees directly related to your business.

 

  • Indemnification: may include business liability insurance premiums, property insurance premiums, disability premiums, workers’ compensation premiums for employees.

 

  • Professional Dues and Licenses: may include franchise fees, professional license fees, business licenses.

 

  • In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.

 

In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.
In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.

 

  1. BE THOROUGH

A crucial step is organizing your receipts and being thorough with your method. Attempt to keep expenses separated by paying with a “business only” designated credit card or bank account when possible and avoid paying in hard cash.

Over time you may find better and newer apps to help manage your receipts but remember to keep using the same classifying process.  By keeping your method, you will be consistent in your receipts collecting and keeping all the overall information easily acceptable to you and your accountant

Duane Donohoo being self-employed himself understands the challenges of owning a small business. He understands the burden the IRS can be to a small business or individual. It was this experience that relates to his self-employment clients and individual clients. Call today (513-528-3982) for a free consultation to find out how Donohoo Accounting Services, Inc. can serve you.