expenses – MARIELA RUIZ, CPA, PLLC

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How to Avoid a Tax Surprise with Your Remote Work Policy

Working from home has been an emerging trend in recent years. It’s a policy that offers incredible flexibility and productivity as per the latest statistics. However, amidst the comfort of home offices, it’s crucial to stay vigilant about potential tax surprises that could lurk in the shadows. In this month’s blog, we’ll help you navigate the tax system and show you how to keep tax surprises as unwelcome guests.

Understanding Home Office Deduction Rules

You may have heard that taking the home office deduction sends a red flag to the IRS and raises your chances of being audited. So first, let’s see if you’re qualified or not for a tax deduction.

If you’re an employer: Your home office must be used exclusively for work, and it should be your primary place of business. Keep meticulous records of your home office expenses, like utilities, internet, and maintenance, to maximize your deductions when tax season rolls around.
If you’re an employee: You unfortunately don’t qualify for the home office tax deduction (some states do allow this tax deduction for employees). Before the TCJA, employees were allowed to deduct taxes, but, starting from the tax years 2018 through 2025, these deductions have been removed.
If you’re self-employed: If you’re a self-employed taxpayer, you’re qualified for these write-offs. The IRS permits you to subtract 50% of your entire self-employment tax from your tax filing.

Track and Document Expenses Thoroughly

When it comes to taxes, documentation is your best friend. Whether it’s equipment purchases, software subscriptions, or office supplies, keep detailed records of your expenses. These records not only help you claim legitimate deductions but also serve as a robust defense in case of an audit.

Related: Learn more about when to consider a financial audit for your startup here.

Review Your Payroll Withholding

Remote work might affect your tax withholding, especially if your employer is located in a different state. Consult with your HR department to make sure your payroll withholding aligns with your current work situation. Adjustments may be necessary to avoid overpaying or underpaying taxes.

Consult a Tax Professional

When in doubt, seek professional advice. A tax professional can provide personalized guidance based on your unique situation, ensuring that you’re taking advantage of all available opportunities while avoiding potential pitfalls. The investment in their expertise can pay off in the long run.

Related: learn more about why it’s crucial to hire a tax expert here.

Conclusion

At MARIELA RUIZ, CPA, PLLC, we are here to help you stay informed and proactive, ensuring that your work-from-home experience remains financially smooth and rewarding. We will uncover industry-specific deductions for more tax breaks and file your taxes for you. Contact us today at (956) 997-0067 or visit our website mruiz-cpa.com to learn more about our services.

A Homeowner’s Guide to Tax Deductions

July 21, 2021 / admin / 0 Comments

Being a homeowner means you can potentially benefit from multiple tax breaks if itemizing deductions on your tax return makes financial sense. However, itemizing your deductions are only beneficial if it exceeds the IRS standard deduction. To decide whether or not it’s worth it, start by adding up all the deductions you qualify for and compare it to the standard. No one wants to pass up an opportunity to save on taxes, so read on to learn more about tax deductions that may apply to you.

Property Tax

A property tax deductible is one of the benefits of being a homeowner. You can deduct up to $10,000 or $5,000 if you’re married filing separately. You might also be able to deduct property and real estate taxes on vacation homes, land, vehicles, etc. The IRS does not allow deductibles on property you don’t own and property taxes you haven’t paid yet. If you rent a home, you also cannot write off any property taxes.

Mortgage Interest Rates

A mortgage interest deductible allows you to reduce your taxes by how much interest you’ve paid during the year. Most homeowners are able to deduct all of their interest expenses. However, it’s important to seek the advice with a financial advisor because there are certain limits. According to NerdWallet, “the deduction is limited to interest on up to $750,000 of debt”. If it exceeds this amount, then you may not qualify for a tax deduction.

Rental Income Deductions

If you’re paying a mortgage with renters living on the property, then you qualify for a rental income deduction. The money you receive for rent can be considered taxable in the same year your receive it. Repairs, such as painting, fixing utilities, and other maintenance, is a deductible expense. However, improvements that add value to the property, such as a completely new roof or patio, are not deductible.

Home Office Expenses

You can only deduct home office expenses if you are self-employed and are working out of your home. These expenses can be divided into two categories: direct and indirect. Direct expenses apply only to the area designated as your home office and is used only for business. Maintenance and repairs applied to only that area can be considered as fully deductible expenses. On the other hand, indirect expenses involve the maintenance of your entire home. These expenses are only deductible to a certain percentage based on the square footage of your office.

Home Medical Equipment

If you have healthcare or medical equipment installed in your home for you, your spouse, or a dependent, then you can get this deducted. This also includes home improvement costs for installing ramps, rails, an escalator system, widening doorways, and so on. Be sure to keep the documents of your medical equipment including those that confirm it was approved or recommended by a medical specialist.

Solar Power

Did you know adding solar power panels to your roof can be added to your tax deduction? Not only is it better for the environment but it will also benefit as tax credit. Beginning in 2021, homeowners can take 22% of the cost of installing solar systems. However, this benefit will be lost by 2023, while commercial and utility users can only claim 10%. Homeowners should take advantage of this benefit while they can.

Conclusion

Overall, there are many potential tax breaks that you may benefit from. Always be sure to keep your documents of proof organized and safe. If you need help compiling your deductibles or are in need of financial advice, rely on MARIELA RUIZ, CPA, PLLC. We are here to make the process easy and stress-free. Learn more about our services by visiting our website or calling us at (956) 997-0067.

3 Types of Small Business Audits

July 25, 2019 / admin / 0 Comments

All business audits share things in common, but do you know what they entail? The auditor, whether someone within your business or an external auditor, will do a thorough evaluation of your accounting books and financial statements. They usually check an entire year’s worth of financial data, including income and expenses. If you’re a small business owner, or maybe just curious about the auditing process, keep reading to learn about the different audits for businesses.

Internal Audit

An internal audit is a self-audit that’s scheduled and conducted by a representative of your own company. Many businesses do an internal audit once a year to ensure the accuracy of their books and financial statements. An internal audit is for your own purposes, and to check for errors or other issues.

Larger companies usually have audit departments, but a smaller business might employ just one or two people to conduct audits. Internal auditors don’t just check business finances; they also check company policies, procedures, and processes to check compliance with internal guidance and federal, state, and local laws.

External Audit

An external audit, also known as an independent audit, is an audit conducted by someone outside the organization. This is called an independent audit because the auditor has no loyalty or responsibility to the business that could create a conflict of interest. In their report, they’ll have to provide an opinion as to whether your company passed the audit. An auditor might take one of the following stances in a business audit:

Clean opinion – The business’s books and financial statements accurately represent the company’s financial position.
Qualified opinion – The auditor disagrees with parts of the company’s financial records, but the audit was too limited in scope or access to come to a definitive conclusion.
Adverse opinion – The auditor found that the business financial records materially misrepresent the company’s financial position.
Disclaimer of opinion – In this type of report, the auditor doesn’t give any opinion on certain financial records.

IRS Audit

An IRS audit occurs when the IRS finds potential errors in your tax return. Usually, the IRS schedules audits for tax returns that were filed in the last three years. A few factors can trigger an IRS audit. For example, if you claim losses for multiple years in a row or report high income levels, you may be subject to an IRS audit.