Unfortunately the IRS notes in Publication 502, that medical expense deductions “do not include…..vitamins or a vacation." So, what can be deducted?

One of the most important major changes impacting taxpayers beginning in 2017 is the allowance of medical deductions which exceed 10 percent of one’s adjusted gross income. In 2016, people 65 years and older were allowed to deduct medical costs that exceeded 7.5 percent of their adjusted gross income. Now everyone is on a level playing field with the 10 percent requirement.

Keeping track of medical related costs such as co-pays, prescriptions, and often forgotten, mileage for driving to medical appointments. These miles can add up and might push you over the 10 percent limit. You can also deduct costs for eyeglasses, chiropractic services, acupuncture, travel expenses, home renovations, reclining chairs, therapeutic swimming, whirlpool baths, wigs, artificial teeth and various other qualifying items. There are certain rules in which some of these qualify and a professional tax consultant can evaluate your medical status to make sure you are not overlooking any of these possibilities if they apply to you.

Another hot topic for healthcare when it comes to taxes is of course, Obamacare, or Patient Protection and Affordable Care Act. The battle over repealing Obamacare is getting very real. However, it is still in effect for now through 2017. If you did not have health coverage in 2016 and don't qualify for a health coverage exemption, the penalty fee is 2.5% of your household income or $695 per adult ($347.50 per child), whichever is higher. And, the same will hold true for 2017.

There are also special rules often overlooked for medical deductions for children of separated parents. Even if a child is claimed as a dependent by one of the parent’s, the other parent can still deduct any medical fees associated with the same child. Keeping track of any medical fees you are paying or splitting can add up on top of yours, to reach that 10 percent limit.

You might also consider shifting out-of-pocket medical expenses into flexible spending accounts, health savings accounts or health reimbursement arrangements so that you can deduct the full amount of your medical expenses. Using a flexible spending account through an employer, or through a health savings account, you can set aside pre-tax dollars from your wages, and then use those pre-tax dollars to pay for medical and dental expenses.

The IRS has a list of close to 100 possible medical deductions. Sifting through all of the details can be cumbersome, so you might consider meeting with a CPA who works with these tax laws ongoing and can cover all the bases when evaluating your tax situation and medical expenditures. If you need assistance in filing your 2016 taxes, or strategizing your 2017 tax planning and financial goals, barton CPA is a reputable Coachella Valley firm and offers a complimentary consultation.

barton CPA
Phone (760) 969-6499

While many people have their concerns when it comes to filing tax returns, women can be especially leery of covering all the areas that warrant a deduction. There are also certain instances for women that can be challenging when having to navigate unchartered territory, such as those who have recently divorced or the death of a partner who always managed the taxes.  

A basic overview and education by a qualified CPA on what the IRS expects to see in a return can be tremendously helpful in grasping and understanding how this system works. Some of the areas covered in such a session would include the following:

  • Statement of income, which includes salaries, IRA distributions and dividends; whereby the bottom of this page totals up adjusted gross income
  • The summary of deductions as well as any credits a taxpayer is entitled to, determined by subtracting deductions and credits from AGI results in an item called taxable income.
  • Schedule A, the “itemized deductions” page that sums up interest deduction on a home mortgage, property tax, charitable contributions and medical expenses above a certain level, including long-term-care insurance.
  • Schedule B, the “interest and ordinary dividends” page that totals income from investments such as CDs, stock dividends and bond interest.
  • Schedule D, “capital gains and losses.” This form–one of the most complicated schedules in the IRS’ broad array of schedules–indicates whether the taxpayer must pay taxes on long-term and short-term gains from the sales of assets. Sales on losses listed here reduce taxable income.

Once understanding the five basic components of the return, there are various deductions that are often overlooked. Forgetting to take these itemized deductions can add up! Here are a few that qualify:

  • Child care expenses:  Your child care provided needs to provide a statement on how much you paid, and in order to take the credit you will need their federal ID number or social security number and address.
  • Tuition, books, computers, and fees: If you have a dependent child in which you pay on behalf of them you may be able to claim an education credit or deduction for the amounts you pay. And remember, if the child goes away to school, and you are providing more than 50 percent support, you may still claim head of household status even during the absence of the child.
  • Major life changes: Understand your tax ramifications if you have married, divorced, purchased a residence, had loss of a residence, changed jobs, or have become self-employed.
  • Max out retirement account contributions: According to the U.S. Department of Labor, 39 percent of female workers are covered by private pension plans, compared with 46 percent of male workers. And when retirement time comes, 32 percent of female retirees get pension benefits, compared with 55 percent of men. Add to that the sad fact that a woman still earns only 76 cents for every dollar a man earns. Get the best tax benefits by contributing as much is allowed.
  • Do not rely on tax money: If you are expecting a large return, hold off on spending that amount before it is confirmed how much you will receive back. Many people will expect a large return and buy new furniture, a car, and other spendy items before receiving their refund. The amount you are expecting back can change, so be wise and wait.
  • Consider your filing status: Eligible single women can get a sizable tax break by filing as Head of Household. Head of Household status requires that you paid more than 50 percent of all expenses associated with keeping up a home and have supported at least one dependent for at least six months out of the year. In addition, single women who have no children, but whom have cared for a dependent family member, can also qualify for Head of Household status.

It can be timely and make one weary in trying to keep up with the many tax laws, but by better understanding the various deductions you will be in the best position to keep those dollars in your pocket as appropriate!  Qualified professionals can be invaluable while many times proving a return on investment for their services, since they are well-versed in all areas of tax law and can identify appropriate candidates for different deductions.

If you need assistance in filing your 2016 taxes, or strategizing your 2017 tax planning and financial goals, barton CPA is a reputable Coachella Valley firm and offers a complimentary consultation.

barton CPA
Phone (760) 969-6499

www.bartoncpa.com

If you think you are saving money by doing your taxes on your own, you might be in for a surprise. Federal tax law is adjusted every year, making it challenging for the average person to keep up to date with, and to understand how these changes can apply to their own tax situation. Even if your circumstances are straightforward, hiring a professional will no doubt save you the time and stress of doing your own taxes, and possibly money. super cpa

There are professional CPA’s who work hard year-round to keep up to date with all adjustments to tax laws making it advantageous to hire someone with an accurate knowledge base so that you are able to take all the deductions you deserve to keep you from overpaying. Professionals can often make valuable tax savings suggestions that you or a software program won’t anticipate, finding little-known deductions or credits that you may be unaware you qualify for.

Also, think about the hours you could save yourself from trying to read through and understand the IRS’s form instructions and newest laws. A professional tax preparer is so familiar with the system, he or she can quickly and easily accomplish tasks that might take even skilled taxpayers hours of research. If you put a monetary value on your time, you might find that the hours you spend laboring over your tax return ends up costing you more than the fee of having a professional manage it for you.

In addition, fees associated with professional tax preparation may be deductible on your income tax return as long as you meet certain eligibility requirements. Tax preparation fees are considered a “miscellaneous” deduction under itemized deductions.

A real life case study, who we will refer to as “John,” brought his past three years of tax returns to barton CPA in Palm Springs for review. John was a professional making a six figure salary, doing his income taxes using an off-the-shelf software for years. When reviewing the last three years of returns, barton CPA noticed that he had failed to capture an extremely large loss that was not reported on his tax return.  This loss was also not caught by the off-the-shelf tax software. He was able to amend the prior three years tax returns, and get a very generous five figure refund, each year. 

Like a good family doctor that knows your medical history, you can develop a relationship with an accountant so that he or she understands your financial situation and future goals. As a trusted professional, they will be able to answer important questions that arise not just during your annual consultation, but at other times during the year as well. Plus, another benefit is that many guarantee representation against a potential tax audit.


If you are now wondering how much money you’ve thrown away over the past few years, or to make sure you aren’t throwing away more this year, barton CPA has 4 locations and can provide a complimentary consultation.

Unfortunately, the IRS notes in Publication 502, that medical expense deductions “do not include…..vitamins or a vacation." So, what can be deducted?

  • Co-pays and prescriptions
  • Medical mileage and medical travel expenses
  • Eyeglasses, chiropractic services and acupuncture
  • Home renovations, therapeutic swimming, whirlpool baths, and more.

A professional tax consultant can make sure you are not overlooking anything that may help you hurdle the new 10 percent allowance for medical deductions beginning in 2017.  For instance, if a child is claimed as a dependent by one parent, the other parent can still deduct any medical fees associated with the same child.

 

The Patient Protection and Affordable Care Act (Obamacare) is still in effect through 2017. If you did not have health coverage in 2016 and don't qualify for a health coverage exemption, the penalty fee is 2.5% of your household income or $695 per adult ($347.50 per child), whichever is higher. And, the same will hold true for 2017.

 

You might also consider shifting out-of-pocket medical expenses into flexible spending accounts, health savings accounts or health reimbursement arrangements so that you can deduct the full amount of your medical expenses. Using a flexible spending account through an employer, or through a health savings account, you can set aside pre-tax dollars from your wages, and then use those pre-tax dollars to pay for medical and dental expenses.

If you need assistance strategizing your 2017 tax planning and financial goals, barton CPA is a reputable Coachella Valley firm and offers a complimentary consultation.

barton CPA

Phone (760) 969-6499

The iCloud that is! There are many innovative technologies available today to increase efficiency and accuracy across industries, and that includes tools for accounting and tax planning. The following technologies can greatly increase your organization of and real-time access to information, while streamlining the process of financial management. If you are looking at employing a CPA, ask them about the types of technologies they are utilizing to assist their clients with the best strategies for efficiency, sharing information, keeping things up-to-date, and providing secure and immediate access to information.

A few of the top cutting-edge technology areas being embraced by firms today include:

Cloud computing & Portals

An advanced web-based platform provides you with a personal, secure portal where you deliver documents electronically and share information in real-time. Regardless of the day, hour or location, you have convenient, confidential access to your financial data. A CPA can offer greater value to client interactions in many ways with portals. They also can enhance collaboration among individuals and work teams in-house who play various roles on managing your portfolio.

Mobile Apps

Using an App to track and manage your expenses throughout the year can save you a great deal of time and work during tax season, eliminating scrambling to locate receipts and organize your material. Your CPA can assist you with determining the most helpful app for your purposes, but a few good ones that include scanning ability and real-time mileage tracking, with slightly differing functionalities are:

  • Neat: With this app you can easily track expenses and create spending reports, expense reports and tax reports.
  • Expensify: This is a useful app for businesses that allows real-time reporting of expenses and reimbursements, as well as syncing with accounting systems. It also creates summarized expense reports with one tap, saving employees time to do other things!
  • Shoeboxed: This app will scan and categorize receipts by amount, vendor and payment method, then file them according to tax category. The app creates expense reports and tracks mileage, and it also has a handy business card function.
  • Tax document automation

This involves converting raw data to digital. Tax document automation systems actually perform several functions, starting with the initial scanning of a client’s tax documents into the firm’s computer or through a secure cloud portal. When this is done, the software uses optical character recognition to look at the digital version of the document and determines what it is, such as a W-2, 1098 or 1099, K-1s, brokerage statements and other documents. After identifying what the form is, the software then grabs information from each field and either automatically populates the information into a client’s tax return, or creates digital PDF workpapers. These digitized tax binders include bookmarks, contents pages and inter-related documents often linked for easy navigation when the professional goes through the documents.

Software to improve efficiency

To improve efficiency and reduce the risk of error, there are software programs that offer analytical tools to identify anomalies in data which require further investigation. Furthermore, data analytics tools are beneficial to identify and assess risk by analyzing data patterns, correlations, and fluctuations.

If you need assistance in filing your 2016 taxes, or strategizing your 2017 tax planning and financial goals, contact barton CPA for a complimentary consultation. Named as “One of the Top 20 Accounting Firms of the Future” by Intuit in 2015, barton CPA continues to provide guidance and technology leadership to clients designed to optimally and profitably serve clients.

 

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