Individual Tax Write-Offs

It is tax time again and you may be wondering what you can write off. Write-offs on your personal returns are considered itemized deductions usually. For more on itemized vs. standardized deductions, see our post here http://www.genesisaccountingsolutions.com/standard-deduction-2020/. Here are a list of common itemized deductions;

  • Home Mortgage interest
    • You will receive a tax document from your mortgage company if this applies.
  • Medical expenses
    • If you had out of pocket medical expenses including co-pays and medication, you may be able to write these off.
  • Charitable contributions
    • Whether you donate money or items, charitable contributions are tax deductible. If you donate, make sure to get a receipt from the organization you donated to for tax preparation purposes.
  • Investment Interest
    • If you made investments that you had to pay interest on you should receive a tax document from your investment firm that you can use to write off the interest on your returns.
  • Property, state and local income taxes
    • Talk to your tax preparer to find out if you can write off any of these type of expenses.

  • Self-employed business expenses
    • If you run a small business but have not yet incorporated, you can write your business expenses off on your tax return provided you have accurate documentation.
  • Business use of home
    • If you use a portion of your home to run your small business and are not incorporated, you may be able to write off a portion of your home expenses like rent and utilities.
  • Business use of vehicle
    • Similar to business use of home, if you use your vehicle for business purposes and are not incorporated, you may be able to write off your mileage or vehicle expenses.
  • Work related education
    • You must be self-employed, a qualified performing artist, a fee-based state or local government official or a disabled person with impairment-related education expenses in order to claim this itemized deduction.
  • Casualty, disaster and theft losses
    • If you live in an area that had a federally declared disaster such as a hurricane or tornado or if something was stolen from your property, you may be eligible for this deduction.

If you are looking for tax preparation services feel free to contact us contact@genesisaccountingsolutions.com. We offer tax preparation for businesses and individuals.

When To Incorporate

You may be wondering if it is time to take your small business to the next level. Maybe you’ve been self-employed and your business has grown. Maybe you secured funding for your business venture from investors. Maybe you’ve been freelancing and want to expand operations. Knowing when to incorporate can save a lot of headache and unnecessary expense.

Cutting Costs

Being a self-employed owner is often expensive. Paying for costs out of your pocket can add up. Maybe it seems like incorporation would save you money. It doesn’t. Incorporation often makes the cost of running a business go up. State filing fees can range from the 100’s to the 1000’s of dollars depending on your state. Incorporation also puts you on the radar with many state and federal agencies making you liable for taxes and corporate compliance.

Who is Liable?

This is a good question to ask if your business operations involve others. When you are self-employed and are the sole employee of your business you are responsible for only yourself. When you begin hiring employees, open a physical location or start taking on investors, you become liable for others involved in your business as well. When you incorporate you create an entity outside yourself that is liable for your business operations. Any assets like buildings and equipment for your business are owned by your business. Your personal assets such as houses and vehicles remain your own. If someone sues your business, your personal assets are protected and remain your own so long as your corporation is compliant. If you are concerned about liability, hiring W-2 employees or taking on investors, incorporation is a good way to protect yourself and your assets.

Taxes

When you incorporate your business is required to file its own tax return with the government and the state you operate in. While this is an additional expense, filing taxes as a corporation can also save you money. If your self-employed business is making more than $100,000.00 per year, it may be time to look into incorporation. As a self-employed business owner you are subject to self-employment taxes. Self-employment taxes mimic corporation taxes which can be higher than corporate taxes depending on your income and deductions. You may also be able to deduct more as a business than you can as self-employed. Certain business expenses are not tax deductible unless you file a corporate tax return.

No Longer Flying Solo

If you are taking on a business partner incorporation is probably the way to go. Becoming a corporation, LLC or General Partnership will protect all people involved in the business. Incorporation also involves detailing the percentage ownership and corporate responsibility of each owner. Having a partnership agreement in place does not require incorporation but is almost always a part of incorporation. If you will be accountable to investors, especially investors that own part of your business, incorporation will help protect your personal assets. Keeping your assets separate from your business assets is essential to your personal financial health.

If you have more questions about incorporation and whether it is right for you, feel free to call us at 1-800-572-4419 for a quote and free consultation. You can also email us at contact@genesisaccountingsolutions.com.

Standardized Deductions 2020

As we head into tax season it is beneficial to know about your itemized and standardized deductions. What is a standardized deduction? Your AGI or Adjusted Gross Income is the amount used to calculate what taxes you owe. To arrive at your AGI the sum of your earnings minus any deductions or tax credit is used. The standardized deduction is the minimum amount the IRS will allow you to deduct from the sum of your earnings to arrive at your AGI.

Itemized deductions & Tax credits

What is an itemized deduction? Itemized deductions are specific expenses that the IRS allows you to deduct from your income to arrive at your AGI. Tax credits are a dollar reduction in the overall amount you owe. For most people the amount of the standardized deduction will be more than the sum of all itemized deductions. You can take either the standardized deduction or the sum of your itemized deductions but not both.

2020 Standardized deduction List

  • Standard or Single deduction
    • $12,400
  • Married Filing Jointly
    • $24,800
  • Married Filed Separately
    • $12,400
  • Head of Household
    • $18,650

If you need someone to file your personal or business taxes feel free to email us at contact@genesisaccountingsolutions.com or call 800-572-4419 for a free consultation. We specialized in virtual bookkeeping and accounting services and also offer tax preparation and filing.

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