ITEMIZING VS. STANDARD DEDUCTION: SIX TIPS TO HELP YOU CHOOSE

IRS TAX TIP 2014-29, MARCH 10, 2014

When you file your tax return, you usually have a choice whether to itemize deductions or take the standard deduction. Before you choose, it’s a good idea to figure your deductions using both methods. Then choose the one that allows you to pay the lower amount of tax. The one that results in the higher deduction amount often gives you the most benefit.

The IRS offers these six tips to help you choose.

1. Figure your itemized deductions.  Add up deductible expenses you paid during the year. These may include expenses such as:
   •  Home mortgage interest
   •  State and local income taxes or sales taxes (but not both)
   •  Real estate and personal property taxes
   •  Gifts to charities
   •  Casualty or theft losses
   •  Unreimbursed medical expenses
   •  Unreimbursed employee business expenses
   
   Special rules and limits apply. Visit IRS.gov and refer to  Publication 17, Your Federal Income Tax for more details.
2. Know your standard deduction.  If you don’t itemize, your basic standard deduction for 2013 depends on your filing status:
   •  Single $6,100
   •  Married Filing Jointly $12,200
   •  Head of Household $8,950
   •  Married Filing Separately $6,100
   •  Qualifying Widow(er) $12,200
   
   Your standard deduction is higher if you’re 65 or older or blind. If someone can claim you as a dependent, that can limit the amount of your deduction.
3. Check the exceptions.  Some people don’t qualify for the standard deduction and therefore should itemize. This includes married couples who file separate returns and one spouse itemizes.
4. Use the IRS’s ITA tool.  Visit IRS.gov and use the Interactive Tax Assistant tool to help determine your standard deduction.
5. File the right forms.  To itemize your deductions, use Form 1040 and  Schedule A, Itemized Deductions. You can take the standard deduction on Forms 1040, 1040A or 1040EZ.
6. File Electronically.  You may be eligible for free, brand-name software to prepare and e-file your tax return. IRS Free File will do the work for you. Free File software will help you determine if you should itemize and file the right tax forms. It will do the math and e-file your return – all for free. Otherwise, you may file electronically with commercial software, or through a paid preparer.

Additional IRS Resources:

THE DO’S AND DON’TS OF TAX WRITE OFFS

Can you smell it in the air?  What’s that you say?  No, it’s not chocolate chip cookies, even though Bruce from Cookie Advantage keeps bringing them by.  It’s tax season!  Or silly season, as it may appear from time-to-time.  That time of year businesses frantically look for receipts, file extensions, and hunt for that elusive tax write off that will save them thousands.

   The truth is there are several legitimate write-offs (deductions, as we call them) that are going to help off-set what you owe the government.  However, there is no lottery version of a write-off that will make you rich either.
Where the concern comes in is from the small business owner that also fancies themselves as a tax DIYer or by having your tax guy or gal get cute with your books.
   For example, one of my favorite Seinfeld clips was the one where Jerry's stereo (things we used to play music back in the day) is broken. Kramer tells Jerry that he can get him a refund by destroying it and sending it back to the manufacturer, so that it looks as if it was damaged by the Post Office.  Jerry knows this is a more than shady plan, but Kramer explains that it just just a write off for the manufacturer.  When Jerry asks Kramer what a write off is…..well, you should just watch thisclip.  No, really, watch it!
 
Alright, let’s look at some do’s and don’ts of tax write offs:
Mileage

• DO - Keep an actual log of the miles you use your vehicle for business purposes.  If necessary us a log book/app or use the sampling method.  Neither are fun, but both are the correct way of doing it.
• DON’T - Make it up!  You will invoke Murphy’s Law!

Home office

• DO – Bother to read the IRS guidelines for Home Office Deductions.  There is even a simplified option for 2013.  Simple by IRS standards, that is.
• DON’T – Try to write off your entire house and all of its expenses or just blindly make up a percentage of home use, without a rationale.

Meals

• DO – Track your meals when you are discussing business with a client.  Write their name on the back of the receipt and know that you can deduct 50% of the meal.
• DON’T – Take your kids to McDonalds every night (a bad practice in general) and your significant other to Outback every weekend and think that you can deduct all of it with the IRS, because you handed a business card to the cashier or server.

Women in Accounting Rock!

In keeping with the upcoming Women's History Month, otherwise known as March, we would like to share some quick statistics from http://www.catalyst.org/knowledge/women-accounting.

• Women are 60.9% of all accountants and auditors in the United States.
• In a 2011 study, women were half of newly hired accounting graduates at CPA firms, and 40% of all CPAs.
• The same study examined the overall number of women employees at the largest accounting firms. By firm, the percentage of employees that were women were:
  • 49.2% at Ernst & Young
  • 48.6% at PricewaterhouseCoopers
  • 48.3% at KPMG
  • 44.0% at Deloitte.
• 
  
• Don't even get us started on women accountants and their use of social media. *Hint, more than their male counterparts.
• 
  
• So......women in accounting are on the upswing.  How cool would it be if you knew some of these trailblazers.