Padding Deductions? Clients Need to be Warned

Drawing of unhappy face and arrow pointing from it to happy faceSome critical clarifications.

By Barry J. Friedman, CPA
IndustryNewsletters

"In this world, nothing can be said to be certain, except death and taxes" is a quote often attributed to Benjamin Franklin. With that in mind, it's best to be prepared, at least financially, for taxes and tax season each year.

MORE: Alternative Minimum Tax: What’s It Like Today? | The Latest Rules on Charitable Donations | How Clients Should Gather Their Papers for Taxes | The Latest Fraud Problem: Synthetic Identities | Real Estate, IRAs & Clients | Percentage-Withholding for Clients | Basis: Turning a Common Client Question into New BusinessThe W-4 Time-Bomb and What To Do About It
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

The Risks

When it comes to deductions, things can get a little sticky. What's the harm in taking a little extra here or a little extra there?
READ MORE →

What to Do with an Inherited Mortgage

4 specific tips.

By Barry J. Friedman, CPA
IndustryNewsletters

The right of inheritance applies to all property, including properties with mortgages attached to them.

MORE: Alternative Minimum Tax: What’s It Like Today? | The Latest Rules on Charitable Donations | The Latest Fraud Problem: Synthetic Identities | How to Challenge Property Taxes | Real Estate, IRAs & Clients | Percentage-Withholding for Clients | Bitcoin: What Clients Need to Know | Supreme Court Wayfair Ruling Sows Confusion – And Opportunity
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

If your client inherits a mortgaged property, a number of questions and concerns may pop up, including whether the mortgage can be assumed. Your client may wonder how to record the deed and take title to the property.
READ MORE →

Alternative Minimum Tax: What’s It Like Today?

There are only two brackets for 2018.

By Barry J. Friedman, CPA
IndustryNewsletters

The Tax Cuts and Jobs Act made many changes to the individual tax law, including the alternative minimum tax.

MORE: The Latest Rules on Charitable Donations | Beware the Taxes of Self-Employment | Charitable Giving under TCJA | Why Padding Tax Deductions Is a Risky Proposition | Portability: Sharing the Estate Tax Exemption
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

One of the goals of the new tax law was to reduce the impact of the AMT or even to repeal it entirely. A modification was made – let's see what it could mean to your clients.
READ MORE →

The Latest Rules on Charitable Donations

5 guidelines.

By Barry J. Friedman, CPA
IndustryNewsletters

Charitable contributions are deductible, says the IRS, only if you itemize deductions.

MORE: Beware the Taxes of Self-Employment | 6 Key Facts About Excise Taxes | Gifts to Charity: 6 Facts about Written Acknowledgments | Yes, Home Equity Loans May Still Be Deductible | Social Security Hike the Largest in 7 Years | How to Talk to Clients about ‘Basis’ | Basis: Turning a Common Client Question into New Business | The W-4 Time-Bomb and What To Do About It
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

But how do your clients know that the charity they are donating to is qualified?
READ MORE →

Medical and Dental Expenses: What Can You Deduct?

Man taking medication from caretakerInsurance premiums can be deducted ... in part.

By Barry J. Friedman, CPA
IndustryNewsletters

Can your clients deduct medical and dental expenses? That's a complicated question.

MORE: Beware the Taxes of Self-Employment | 6 Key Facts About Excise Taxes | Gifts to Charity: 6 Facts about Written Acknowledgments | Yes, Home Equity Loans May Still Be Deductible | Social Security Hike the Largest in 7 Years | Basis: Turning a Common Client Question into New Business
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

To start with, their deductions must exceed 7.5 percent of their adjusted gross income. And they have to fall into an IRS-approved category.
READ MORE →

Beware the Taxes of Self-Employment

Senior executive in home office with two monitors and keyboard on leather desk and looking at paperwork on deskThat 15.3% is likely to be a stunner.

By Barry J. Friedman, CPA
IndustryNewsletters

Your clients are self-employed if they're in business for themselves – including a part-time business. That means they're also their own tax manager!

MORE: 6 Key Facts About Excise Taxes | How Clients Should Gather Their Papers for Taxes | The Latest Fraud Problem: Synthetic Identities | How to Challenge Property Taxes | Real Estate, IRAs & Clients | Percentage-Withholding for Clients | Bitcoin: What Clients Need to Know
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Your clients can be self-employed as a sole proprietor/an independent contractor, or a member of a partnership or of a limited liability company. As such, they need to file an annual income tax return and pay estimated taxes throughout the year on their income.
READ MORE →

6 Key Facts About Excise Taxes

Unexpected reasons the government wants more money.

By Barry J. Friedman, CPA
IndustryNewsletters

Everyone knows about income taxes and sales taxes, but we tend to forget about excise taxes, because they're not obvious.

MORE: How Clients Should Gather Their Papers for Taxes | Charitable Giving under TCJA | Why Padding Tax Deductions Is a Risky Proposition | Portability: Sharing the Estate Tax Exemption | Tariffs: What Clients Need to Know Now
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Excise taxes are paid when purchases are made on specific goods or activities, such as wagering or highway usage by trucks. The producers or merchants pay the tax and typically include the additional tax in the price to the end consumer.
READ MORE →

How Clients Should Gather Their Papers for Taxes

Woman holding paper at deskThey don't have to eat the rhino all in one bite.

By Barry J. Friedman, CPA
IndustryNewsletters

Don't let your clients find themselves frantically searching for information they need to file their tax returns at the last minute. Help them reduce filing difficulties and possibly their tax bills by knowing what documents to have at your fingertips.

MORE: Charitable Giving under TCJA | Gifts to Charity: 6 Facts about Written Acknowledgments | Yes, Home Equity Loans May Still Be Deductible | How to Talk to Clients about ‘Basis’
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Most of the papers they need to document the income, interest and withheld taxes they report arrive in your mailbox in January, with investment-related 1099s often coming in February. They can get ready for that arrival by creating print and online folders. It's a good idea to create a paper and an email tax folder for messages relating directly to tax information.
READ MORE →

Charitable Giving under TCJA

Donor-advised funds can be a simpler option.

By Barry J. Friedman, CPA
IndustryNewsletters

The new tax law nearly doubles the standard deduction for individuals and families, simplifying the filing process for millions of Americans, but complicating giving strategies for many who have made a habit of deducting their charitable contributions.

MORE: The Latest Fraud Problem: Synthetic Identities | Why Padding Tax Deductions Is a Risky Proposition | Portability: Sharing the Estate Tax Exemption | Tariffs: What Clients Need to Know Now
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Indeed, an estimate from the Washington, D.C., Tax Policy Center is that the number of itemizers will drop from 46 million to 13 million. That means most taxpayers will have little tax incentive to donate cash or stock to charity, reducing giving by $13 billion to $20 billion a year.
READ MORE →

Gifts to Charity: 6 Facts about Written Acknowledgments

And of course, make sure the deduction is qualified.

By Barry J. Friedman, CPA
IndustryNewsletters

If your clients offer gifts or money to qualified organizations eligible to receive tax-deductible charitable contributions, they must do two things:

MORE: The Latest Fraud Problem: Synthetic Identities | Why Padding Tax Deductions Is a Risky Proposition | Portability: Sharing the Estate Tax Exemption | Tariffs: What Clients Need to Know Now | Basis: Turning a Common Client Question into New Business | The W-4 Time-Bomb and What To Do About It
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

  1. Have a bank record or written communication from the charity for any monetary contributions.
  2. Get a written acknowledgment from the charity for any single donation of $250 or more.

READ MORE →

The Latest Fraud Problem: Synthetic Identities

BONUS: 5 steps for prevention.

By Barry J. Friedman, CPA
IndustryNewsletters

By combining some factual stolen information with completely fake information, thieves convince banks and credit monitoring companies that a fake identity is real. The "bad guy" is not pretending to be the person whose information was stolen or acquired; rather, the data is being used to create a brand-new identity. Thus, the phrase "synthetic identity theft" is born.

MORE: Why Padding Tax Deductions Is a Risky Proposition | Yes, Home Equity Loans May Still Be Deductible | Social Security Hike the Largest in 7 Years
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

But how do these scams work?

READ MORE →

Why Padding Tax Deductions Is a Risky Proposition

Some client education may be in order.

By Barry J. Friedman, CPA
IndustryNewsletters

"In this world, nothing can be said to be certain, except death and taxes" is a quote often attributed to Benjamin Franklin. With that in mind, it's best to be prepared, at least financially, for taxes and tax season each year.

MORE: Yes, Home Equity Loans May Still Be Deductible | How to Challenge Property Taxes | Real Estate, IRAs & Clients | Percentage-Withholding for Clients | Bitcoin: What Clients Need to Know | Supreme Court Wayfair Ruling Sows Confusion – And Opportunity
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

The Risks

When it comes to deductions, things can get a little sticky. Some clients may wonder what the harm is in taking a little extra here or a little extra there.
READ MORE →

Yes, Home Equity Loans May Still Be Deductible

But watch out for the lower dollar limit.

By Barry J. Friedman, CPA
IndustryNewsletters

Contrary to early reports, the Tax Cuts and Jobs Act allows taxpayers who buy, build or substantially improve their homes using either a home equity loan, home equity lines of credit (HELOC) or second mortgages to deduct interest on the loans.

MORE: How to Challenge Property Taxes | Portability: Sharing the Estate Tax Exemption | Tariffs: What Clients Need to Know Now | New SALT Deduction Limit: What Clients Need to Know | Passwords: How to Beat the Hackers
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

That's the good news. But if clients take out the loan to pay for personal living expenses – credit card debt, for instance – they can't deduct the interest from their taxes.
READ MORE →