MARIELA RUIZ, CPA, PLLC

Helping Individuals and Businesses Financially Thrive.

Tax Deductions for Working at Home

The global pandemic of 2020 pushed many businesses to allow their employees to work from home. Many companies look for postponements, cancellations, potentially staff illness, and lockdowns during these difficult times. Many people are looking for tax deductions for working at home. However, getting the tax break is not as simple as it may seem. Here’s some information to consider before trying to get a tax deduction for working at home.

Self-Employed Taxpayers and Independent Contractors

            According to Barbara Weltman, the owner of Big Ideas for Small Business, she states, “If you’re an employee filing taxes between 2018 and 2025, you cannot claim the deduction.” The 2017 Tax Cuts and Jobs Act says that an employee cannot include unreimbursed business expenses if they worked from home at their employee’s convenience. However, the Internal Revenue Service (IRS) claims that self-employed taxpayers and independent contractors are entitled to the deduction. Additionally, individuals earning money in a gig economy can potentially claim the credit, such as a person who is an employee and a gig worker on the side. Many states such as Arkansas, California, Hawaii, Minnesota, New York, and Pennsylvania will let employees take deductions on home office expenses.

Eligible Individuals

            As explained by the IRS, individuals who are exclusively and regularly using their home as a place of business can receive the tax deduction. Unfortunately, a spare bedroom or detached garage used only a few times throughout the year may not fit in exclusive and regular quota. It is important to understand that an audit’s stresses do not compare to the benefits of a deduction. The best thing to do is take a picture of the workspace to present evidence to the IRS.

Two Types of Deduction

            There are two types of tax deductions that an individual may receive depending upon a few elements. Firstly, there is a simplified method that offers a deduction of $1,500 to taxpayers. It requires filling out a Schedule C document, which asks the total square footage of a home and the space being used as a business inside the house.  The IRS will conduct an equation of $5 per square foot, making a home office space of 300 square feet have a tax break. Schedule C’s benefit is that a tax filer does not have to keep evidence of home office expenses.

The other tax deduction can be a tremendous tax saver for people who have been working from home for a long time. IRS Form 8829 is where you show your math in claiming the deduction by adding business expenses like rent, utilities, renters’ insurance, and improvements to space. Some self-employed taxpayers may be losing money by choosing the simplified method.

Conclusion

            Receiving a tax deduction is always a great way to save money. However, there are some specific requirements that people working from home need to meet. Also, taxpayers who are patient can find themselves with more money in their pockets. For more useful information, you can contact MARIELA RUIZ, CPA, PLLC. We specialize in all helping individuals and businesses financially thrive. For many years we have offered various services, including forensic accounting, tax services, financial consulting, bookkeeping, and much more. Our many years of experience ensure that you’re in good hands. Visit our website to contact us today!

What is Solar Power Tax Credit?

Green energy sources have many benefits to you and the world, including a federal tax credit or home and business owners who have had solar power panels installed before December 31. The federal solar tax credit, known as the investment tax credit (ITC), is much more profitable than a deduction. However, for taxpayers to get the full benefit, the world needs a sufficient income. Here are what tax professionals should know about ITC.

Introduction

When the government provides a tax incentive, it is happy about it, especially when local and state enticements convoy it. According to the Environmental Protection Agency, the government passed the ITC as part of the Energy Policy Act, which has been extended four times since its initial passage. The credit is now at 26 percent for the next two years so that eligible taxpayers can have a dollar-for-dollar decrease in the amount of income tax they owe. Taxpayers are looking forward to 2023 because the tax credit will drop to 22 percent. Renewable portfolio standards are in some states where utility companies give clients a specified minimum amount of electricity from solar. Utility companies buy energy made by a solar customer’s house. The value of solar renewable energy certificates will vary by state, but this is an example of taxpayer liberation.

How Does It Work?

            Solar power panels remain to provide people with prospective savings after filing their taxes. Solar energy creates opportunities to resell excess energy, evade power outages when harmonizing with a battery, and charge electric cars. The sun’s rays shine on the solar panels resulting in generating electricity that gives homeowners lower electric bills. The energy is completely free to the owner once the payment to the solar company ends. Also, solar power works all day, even when it is raining or dark overcast. Utility companies can offer the ability to sell back electricity to the grid for a credit on a homeowner’s electric bill. The utility companies can credit a home’s electric account.

The government is devoted to solar power that many states and cities have recognized property tax exemptions on solar. The solar panel installation calculates property tax fees giving homeowners and companies more money.

Conclusion

Solar energy panels have many benefits for businesses and homeowners. However, it could be challenging to understand everything about the tax deduction that comes with installation. You can count on Mariela Ruiz, CPA, PLLC, to help you with your taxes. We can give you tax advice for any situation you are in and find a financial solution that benefits you. We want to save you money by providing attentive and well-strategized plans, so call us at (956) 997-0067 today!

Common Itemized Deductions

When you are preparing to file your taxes, don’t forget about itemized deductions. These are individual tax deductions you can take in lieu of the standard deduction. Making the decision to itemize could potentially save you more money on taxes. To learn more about the types of deductions you can itemize, continue reading our blog.

Charitable Deductions

Did you contribute to a charity in the past year? If you made donations to a qualifying organization, you can itemize and therefore, lower your tax bill. It’s important to keep a record of donations, which can include everything from bank records to receipts. Make sure that you have the name of the organization, the amount donated, and the date. The more information you have, the more accurate your tax form will be.

Medical and Dental Expenses

Medical expenses are deductible as itemized deductions, but in a very limited way. You can only deduct the amount of medical expenses that exceed 10% of your AGI or 7.5% if you’re over 65. You and your family members that have qualifying medical expenses can take advantage of these deductions. Examples include: doctor’s fees, co-pays, prescriptions, transportation to a medical facility, and more.

Work-Related Education Expenses

If you choose to itemize work-related education expenses, you may be able to deduct these expenses from your taxes. To claim this deduction, costs must be related to maintaining or improving job skills and required by your employer. These costs include tuition, books, lab fees, travel, etc. It’s also important to note that you can only deduct these expenses if they exceed 2% of your adjusted gross income.

Conclusion

If you have questions about itemized deductions for your 2020 taxes, then call MARIELA RUIZ, CPA, PLLC. We have the tax solutions you need to get more out of your tax return. From income tax preparation to strategic tax planning, contact our advisors for more details on how you can save money!

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What You Need to Know for the 2021 Tax Season

Many will agree that 2020 has been a year of unique challenges but 2021 is just right around the corner! With that being said, below we discuss some things to keep in mind as we approach 2021 and the upcoming tax season.

Tax Day is Thursday April 15th, 2021

This is the date you must file you taxes before! Most can take the standard deduction which has increased from this year to $12,400 for single filers and $24,800 for married couples filing jointly. You may also itemize your deductions which is a little bit more painstaking, however is worth it if your itemized deductions exceed your standard deduction.

Stimulus Checks Aren’t Taxable

The CARES Act was instituted near the beginning of the COVID-19 pandemic and gave many citizens a onetime payment of $1200. These payments will not count as taxable income in the upcoming year which is great news for most tax payers! You can think of it as a kind of advanced refund you would have received as part of your 2021 tax refund.

Unemployment Income is Taxable

The pandemic has caused much of the country to shut down for extended periods of time, leaving many Americans jobless through no fault of their own. If you were one of the millions of Americans who received unemployment benefits in 2020, you have to pay taxes on that income. If you opted to defer taxes on your unemployment payments before you received them then you will need to save for the taxes that will be due when you file, or pay estimated quarterly taxes to stay ahead.

Final Thoughts

As always, consult your tax professional to get the most out of your taxes in 2021 and speak with someone who can help you in your specific financial situation. Mariela Ruiz, CPA, PLLC is here to help individuals and business owners in the Mission, TX community with their taxes and wishes you all a prosperous 2021!

What Can a General Ledger Tell You About Your Business?

According to The Blueprint, “The general ledger is an essential part of accounting and bookkeeping processes. The general ledger serves as a repository for every transaction that is recorded, and is a must for any business using double-entry accounting.” Companies can use a general ledger as a way to view specific details from transactions from month to month or even the current year. Learn more about what a general ledger can do for your business.

Manage Expenses

Have you noticed you are paying more utilities and rent? Are there increased costs for professional services you were not aware of? You can access your transactions by running a general ledger report to see activity. These transactions are recorded in different account types, such as assets, revenues, expenses, etc. Within your expense category, you can find detailed information on rent, payroll, and professional services you use. A general ledger allows you to manage overhead costs and get an overall view of your business expenses.

View Monthly Activity

If you need to look at expenses from March to April, run a general ledger report for more details. This accounting practice is encouraged for company owners to see their activity for a specific time period. The general ledger will have beginning and ending balances for the months you need. Any activity between those time periods are shown, which can be activity from sales, payroll, inventory adjustments, and more.

Catch Any Errors

If there is an unusual increase in expenses from a certain category, turn to your general ledger. You can look for errors by viewing the activity. In addition, you can check on any journal entries recorded or modified. Corrections for any errors can be made within the journal entry. If the journey entry is true, then no correction is necessary.

Conclusion

When you need general ledger accounting, contact MARIELA RUIZ, CPA, PLLC. We review and analyze your general ledger for any discrepancies and determine if corrective action is necessary. To learn more about our general ledger service, call (956) 997-0067 or visit us online here.

How Receiving Unemployment Affects Your Taxes

Unemployment insurance is a benefit that most W-2 employees can qualify for if they’ve lost their job for reasons outside of their control. This includes partial or total unemployment, whether they were laid off entirely or had their hours reduced significantly.  

Withholding vs Not Withholding

When signing up for unemployment insurance either online or by mail, there’s a small box near the bottom that allows you to choose if you’d like your unemployment income to be taxed now (withholding) or when you file your taxes in the spring (not withholding). As a result of not checking this box and not having taxes withheld, many are surprised to discover they owe more at tax season than they ever did when employed.

Why 2020 and 2021 Are Unique

While all of the above remains true year after year, the next tax season will pose a lot of firsts for many. Most employers and employees have never experienced mass layoffs and closures like we saw in 2020, and will not know what to fully expect when filing their taxes in 2021.

When The CARES Act was passed to help keep the economy afloat, those making less than thirty thousand annually before filing for unemployment ended up receiving a much higher income than they had when working. It’s crucial for those who received unemployment benefits in 2020 and did not choose to have their taxes withheld to understand they may owe a considerable amount of money when filing in 2021.

Final Thoughts

With all that has happened with the economy and unemployment in 2020, the path forward has never been more confusing. When you need professional assistance with your taxes, bookkeeping, payroll, accounting and more, visit us here for help you can rely on.

Financial Forecasting for Your Business

In order for your business to be successful in the future, it’s essential to have a financial forecast. What is a financial forecast? It’s an overview of your company’s current finances and resources. You can use it as a guide for budgeting and strategic targets for the future, allowing you to stay on track with goals for your business. It gives a detailed forecast of business trends so you can maneuver the direction you want the company to go. Learn more about the benefits of financial forecasting by reading our blog.

Clearing a Path

Preferred CFO says it best – “Having accurate and up-to-date financial records is vitally important for day-to-day operations. However, having an accurate financial forecast can be the difference between success and failure for a company.” This type of forecast reflects your company’s finances and resources, giving you the information you need for future planning, including long-term goals. These goals can be anywhere from six months to a year or even longer.

Confidence with Growth

Having confidence in your company is one thing, but it’s different when you have definite goals that you want to achieve. Of course, there are certain steps you must take, but with a financial forecast, it can help you get there. Following an accurate forecast can assist with growth within your business, as well as create trust and confidence with investors.

Plan of Action

With your financial forecast in hand, you can plan what resources you will need, including when and how to use them. For example, resources for your company may include cash investments, materials, employees, and so on. Using the forecast as a reference, you can make decisions based on accurate financial information. Answers to questions such as “how much do I need to make sure I don’t run out before the next funding round?” or “how many employees do I need to prevent overstaffing or understaffing to achieve this quarter’s goals?” are made much clearer.

Conclusion

MARIELA RUIZ, CPA, PLLC offers financial forecasting and projections for clients in the city of Mission and surrounding areas. With our certified public accountants by your side, you can be confident in our services and the success of your business. Get in touch with an accountant at MARIELA RUIZ, CPA, PLLC today!

Should You File Your Taxes Jointly or Separately?

For married couples who live together and share finances, tax season can bring with it a lot of questions about how you should file and why. In this month’s blog post we briefly dive into what couples need to know before filing their taxes and how they can determine if they should file jointly or separately.

Married Filing Jointly

Your filing status determines your tax rate and the amount of deductions you can qualify for. For most couples filing jointly is the best option for several reasons. Basically, married couples can continue to qualify for a lower tax rate despite having a higher taxable combined income. This tax break in addition to one of the largest standard deductions offered by the IRS makes filing jointly the best option for the vast majority of married couples.

Married Filing Separately

The circumstances in which a married couple would benefit more from filing separately are far and few between. They mostly include situations where one spouse has outstanding deferred debt that needs to be collected promptly. Examples can include having large amounts of student debt or costly outstanding medical bills. Filing separately is also the best option for couples who are expecting to get divorced within the year.

Final Thoughts

If you’re still unsure of which status makes the most sense for you, call on a highly qualified and experienced CPA. One tax service does not fit all so it’s important to turn to a professional who is committed to finding the absolute best option for you and your family. Contact the experts here for a variety of services including forensic accounting, tax services, financial consulting, bookkeeping, and much more.

Steps to Take Before Filing Your Taxes

Before you contact your tax preparer, ensure you have the necessary documents to hand over. It’s important to have previous year’s tax information, as well as current receipts and documents. Getting an early start on gathering these items will not only speed up the process, but give your tax preparer more time to double check all of your information. Learn more about which forms you will need to file a complete tax return.

The Essentials

Forms from employers, banks, and other businesses need to be filed your tax return, so have these documents ready to go. Some of the most common forms include Form W-2, Form 1099, and Form 1098. These documents indicate the income you’ve received from the previous year. If you are unsure about which documents need to be filed, get in contact with your tax preparer for confirmation.

The Receipts

Receipts act as a form of proof to show so you can properly itemize your deductions. Whether you choose itemize or claim the standard deduction, it’s a good idea to compare your findings and see which one has the greater write-off. Your list of expenses may include anything from medical costs and mortgage interest to charitable contributions. Consult with your tax preparer if itemizing is worth it.

The Tax Return from Last Year

Grab your tax return from last year, even if you are using the same tax preparer. You can look over it for any inconsistences and ensure your current tax return is up to date. It can also provide details about forms you received from last year, and that you have these forms from this year too. Investopedia also comments, “If you made small gifts, you may not have received any acknowledgment from the organization, but you can still deduct these contributions as long as you have a canceled check or other proof.”

Conclusion

The process of filing taxes can be confusing, so let our certified public accountants do the work for you. We are here to prep your tax documents and handle all forms with the utmost professionalism. Refer to MARIELA RUIZ, CPA, PLLC for tax preparation services today.

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