Tax Benefits for Higher Education Expense

Check Out Tax Benefits for Higher Education  

Higher education costs paid in 2016 can mean tax savings when taxpayers file their tax returns. If taxpayers, their spouses or their dependents took post-high school coursework last year, they may be eligible for a tax credit or deduction.
Here are some facts from the IRS about tax benefits for higher education.
For 2016, there are two tax credits available to help taxpayers offset the costs of higher education. The American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of income tax owed. Use Form 8863 to claim the education credits.
The American Opportunity Credit (AOC) is:

• Worth a maximum benefit up to $2,500 per eligible student.
• Only for the first four years at an eligible college or vocational school.
• For students pursuing a degree or other recognized education credential.
• For students enrolled at least half time for at least one academic period during 2016. Taxpayers can claim the AOC for a student enrolled in the first three months of 2017 as long as they paid qualified expenses in 2016.

The Lifetime Learning Credit (LLC) is:

• Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify.
• Available for all years of postsecondary education and for courses to acquire or improve job skills.
• Available for an unlimited number of tax years

The tuition and fees deduction can reduce the amount of income subject to tax. This deduction may be beneficial for taxpayers who don't qualify for the American Opportunity Credit or the Lifetime Learning Credit. Use Form 8917 to claim the tuition and fees deduction.
The Tuition and Fees Deduction is:

• Worth a maximum benefit up to $4,000,
• Claimed as an adjustment to income,
• Available even if a taxpayer doesn’t itemize deductions on Schedule A,
• Limited to tuition and certain related expenses required for enrollment or attendance at eligible postsecondary educational institutions.

Additionally:

• Beginning in 2016, to be eligible for an education benefit, a student is required to have Form 1098-T, Tuition Statement. They receive this form from the school they attended. There are exceptions for some students. See Publication 970 for more details.
• They may only claim qualifying expenses paid in 2016.
• They can’t claim either credit if someone else claims them as a dependent.
• They can’t claim either AOTC or LLC and the Tuition and Fees Deduction for the same student or for the same expense in the same year.
• Income limits could reduce the amount of credits or deductions they can claim.
• The Interactive Tax Assistant tool on IRS.gov can help check eligibility.

IRS Free File. Taxpayers can use IRS Free File to prepare and e-file their federal tax returns for free. File Form 8863, Education Credits, with your Form 1040. Free File is only available at IRS.gov/freefile.
The IRS reminds students using the Free Application for Federal Student Aid (FAFSA) that the IRS Data Retrieval Tool currently is unavailable.  This does not limit an individual’s ability to apply for aid. Applicants can manually provide their tax return information. The IRS offers alternatives for the retrieval of the income information needed.
Additional IRS Resources:

• Tax Benefits for Education: Information Center
• Education Credits--AOTC and LLC
• American Opportunity Tax Credit
• Lifetime Learning Credit
• American Opportunity Tax Credit: Questions and Answers

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Source IRS email Tax tip 2017-31

The worst part of owning a business is.....

Two years ago I wrote, what is the worst part of owning a business?  If you guessed employees you would be wrong. According to the small business owners polled by the Service Corps of Retired Executives,  40 percent said bookkeeping and taxes are the worst part of owning a business.  It is still true.  

Want to save money on taxes?  Keep better records. Want to make more money, become more profitable?  Keep better records. Want to breeze through an IRS examination?  Keep better records.

We call it the very exciting world of record keeping for business.  Unfortunately us small business owners are doing it every day.  You know the things that your small business does. The production end. Recordkeeping is often put off or not completed at all. As most businesses grow, eventually the light bulb goes on, usually at tax time, and the realization that some record keeping needs to be done.  

What can you do?

In the old days we built our business on bookkeeping....an era before desktop computers and the internet. Nowadays the computer has revolutionized your small business record keeping.  Here are three options you can try to make things a little easier.  Don’t struggle.  Don’t miss out valuable deductions.  Make record keeping part of your daily routine.

1.  Go online. Free advertiser supported online accounting software is available.  Probably the most popular free software online is Wave.

Here is a link to their website: https://www.waveapps.com/.

It is easy. Fairly comprehensive. Working with your tax guy is easy, too. Just invite us as a Guest Collaborator and we can both see your data, securely, in real time.  Perhaps the best part is the automatic download your bank account into your accounting records limiting the amount of data input you have to do. Advantages? It is free.  It is intuitive.  No need to change the way you are doing business today.  We like wave accounting so much we became a Wave accounting pro advisor.

2.  Consider a stand alone accounting software.  We recommend the Quickbooks clone Avanquest Bookkeeper.  This program offers more bang for the bucks than the 800 pound elephant Quickbooks.  It is $39.95.  What do you get for your money?  A fully functioning accounting software that includes credit card processing for no additional charge.  

3.  The ubiquitous Quickbooks.  It is expensive.  Requires yearly updates.  Currently the payroll update alone is $400.00.  Our payroll service is cheaper. And it seems that you are constantly bombarded with additional add-ons to buy.  However, the accounting community has embraced it as the defacto standard that our client’s are using to keep track of their records. We work every day with Quickbooks.

I know that there are other methods and systems.  I have always taken the position that what works for you works for me.  However, I suggest that you give the Wave accounting folks a try first and help you not miss all those deductions next year.

IRS Busting Refund Myths

The IRS release a list of five common tax season myths.  Here is an explanation via our friends at Drake Software.

Myth: All Refunds Will Be Delayed this Year

While qualifying returns claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) will not begin having refunds issued until February 15 at the earliest, the vast majority (90%) of federal tax refunds will be issued in less than 21 days.

Myth: Refunds Are Issued Faster if You Call the IRS

Calling the IRS or your tax preparer will not speed up the refund process. However, if you want to know the status of your refund, just use the IRS.gov “Where’s My Refund?” tool – it can also be accessed on the mobile app, IRS2Go.

Myth: Ordering a Tax Transcript will Give You a Refund Date

Tax transcripts can be used for several things, like verifying past income and tax filing status. One thing they can’t do: prophesy a refund date.

Myth: Since “Where’s My Refund?” Doesn’t Have a Deposit Date, It’s Wrong

Taxpayers claiming the EITC and ACTC will not see a projected deposit date on the “Where’s My Refund?” tool until after February 15.

Myth: EITC and ACTC Refunds Will Arrive on February 15

Direct deposit is currently the fastest way to receive a tax refund, and the earliest the IRS expects those refunds will be direct deposited is the week of February 27.

The Short Version

If you didn’t hear it from the IRS or it sounds too good to be true, it’s probably a refund myth.
Aside from making sure your tax information is accurate, filing in a timely manner, and opting for direct deposit, you can’t speed up the refund process. Even then, EITC and ACTC returns are being more closely scrutinized due to a provision in the Protecting Americans from Tax Hikes (PATH) Act of 2015 that focuses on stopping fraudsters from illegally filing returns using stolen taxpayer information. As a result, those refunds won’t be issued until February 15 and likely won’t arrive until the week of February 27. And don’t forget: some states may also delay state income tax refunds.
Source: Internal Revenue Service