DiIorio & DiIorio Accounting Firm

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Renewing ITINs - Did You Know?Individual Taxpayer Identification Numbers are used for taxpayers who are required for U.S...
11/19/2019

Renewing ITINs - Did You Know?

Individual Taxpayer Identification Numbers are used for taxpayers who are required for U.S. tax purposes to have a U.S. taxpayer identification number but do not qualify to get a social security number.

If you use an ITIN, you should check if it expires this year. If it does, information about how to renew your ITIN can be found at: https://www.irs.gov/credits-deductions/individuals/how-do-i-renew-my-itin. Keeping your ITIN current helps avoid tax refund and processing delays.

Taxpayers who have not used their ITIN to file a federal return at least once in the last three years will see their number expire Dec. 31, 2019. Additionally, ITINs with middle digits of 83, 84, 85, 86 or 87 (e.g. 9NN-83-NNNN) will also expire at the end of the year.

Claiming the Other Dependent Tax Credit – Did You Know?If you have a dependent who does not meet the criteria for the Ch...
11/12/2019

Claiming the Other Dependent Tax Credit – Did You Know?

If you have a dependent who does not meet the criteria for the Child Tax Credit (CTC), you may still qualify for a $500 credit called the Other Dependent Credit. Also called the Family Tax Credit, this nonrefundable credit was created under the Tax Cuts and Jobs Act (TCJA) of 2017. Examples of qualifying dependents include children of age 17 or 18 (or up to age 23 if they are full-time students), and adult relatives who are unable to support themselves due to a disability.

Your claimed dependents must be US citizens, resident aliens, or nationals, and must have a taxpayer ID number (SSN or ITIN). Children must not have been claimed for the CTC by you or anyone else, must rely on you for at least half of their financial support, and generally must live with you for over half the year. Claimed adult dependents (called “qualifying relatives” by the IRS) must have a gross income of less than $4,200 for 2019, and must either be your true relative or live with you full time. The term “true relative” covers a broad range of relationships, including in-laws and stepchildren.

A qualified tax advisor can help you determine your eligibility for the Other Dependent Credit. If you have more than one qualifying dependent, you may be able to take the credit for each of them.

Tracking Utilities for Home Office Expense – Did You Know?If you plan to claim a deduction for Expenses for Business Use...
11/05/2019

Tracking Utilities for Home Office Expense – Did You Know?

If you plan to claim a deduction for Expenses for Business Use of Your Home (home office expense) on your tax return, you need a reliable method to calculate your deductible utility costs. IRS rules require that you separate utility expenses that apply to only the residential portions of your home (such as cooking gas or electricity used by your refrigerator) from those that pertain to the entire property. Only the latter type can qualify as home workspace expenses.

For example, if your cooking range, water heater and furnace all run on natural gas, you may need to figure out the gas cost associated specifically with heating your home. One way to do this is to average your gas bills from summer months when you did not use heat. This average shows how much of your gas bill is attributable to your range and water heater. By subtracting this amount from your gas bill for every month, you can calculate how much money you spent specifically on heat during the year. You may then be able to deduct a portion of this total as a home office utilities expense, based on the area of your workspace.

An experienced tax pro can give you other ideas for tracking and calculating the allowed utility costs associated with your home office. The IRS does not require perfect accuracy, but your calculation methods must be logical, reasonable and based on written evidence such as monthly utility bills.

QBI Tax Deduction for Self-Employed Individuals – Did You Know?If you are a freelancer or otherwise participate in the “...
10/29/2019

QBI Tax Deduction for Self-Employed Individuals – Did You Know?

If you are a freelancer or otherwise participate in the “gig economy”, you may be able to claim a new tax deduction under the Tax Cuts and Jobs Act (TCJA). The Qualified Business Income (QBI) Deduction applies to self-employment earnings (basically, any income you receive in a setting where you are not classified as an employee). Under the provision, individuals may be able to deduct up to 20% of their self-employment income on their tax returns.

Because the QBI deduction is claimed “above the line,” you can reduce your gross income without itemizing deductions. However, the deduction is subject to a number of rules, including income restrictions for certain self-employment activities, and limits on the size of the deduction relative to your taxable income. A qualified tax advisor can help you understand how these rules apply to your situation.

Saving Receipts to Document Expenses – Did You Know?For most personal or business expenses that you claim as deductions ...
10/24/2019

Saving Receipts to Document Expenses – Did You Know?

For most personal or business expenses that you claim as deductions on your tax forms, the IRS requires that you preserve written documentation of each expense. Acceptable forms of written evidence include receipts, invoices, canceled checks, and credit card and bank account statements. These documents should clearly show the date, location, amount and, if possible, nature of each expense. An experienced tax pro can help you review your supporting evidence to make sure it satisfies IRS rules.

Importantly, your documents need not be originals. Photocopied, scanned or photographed receipts are okay, as long as they clearly show all the information on the original document. However, since you may be required to present your evidence on paper in the event of an audit, you should save digital files in a form that allows you to print hard copies.

In most cases, IRS rules require you to save your written documentation for three years after you file your return. However, if there is any chance that you have omitted income from your tax return that you should have reported, you must maintain your records for six years after filing.

IRS Removes Computers from Listed Property – Did You Know?Historically, the IRS classified many computers and computer p...
10/15/2019

IRS Removes Computers from Listed Property – Did You Know?

Historically, the IRS classified many computers and computer peripherals (such as printers) as “Listed Property.” If your business use of Listed Property is less than 50%, you are usually required to distribute the business portion of the property's cost over your tax returns for multiple years, using a depreciation method that is unfavorable to the taxpayer.

However, computer equipment placed in service after December 31, 2017 has been removed from the Listed Property category. This change in classification makes it much easier to deduct computer costs as business expenses on your tax returns. Under the new rules, you may be able to deduct the business-use portion of the cost of computer equipment put in service in 2018 or later using any appropriate depreciation method, even if your business use is less than 50%.

In particular, you may be able to use the 100% bonus depreciation option that is available through 2022 under the Tax Cuts and Jobs Act (TCJA). This option could allow you to deduct the entire business-use portion of the cost of computer equipment in a single year, usually the year in which you put the equipment into service. If you use your computer for both business and personal tasks, a qualified tax advisor can help you determine the proper business-use percentage to use in order to calculate your deduction.

Six Month Filing Extension DeadlinesIf you requested an extra six-month extension in April to file your 2018 personal in...
10/07/2019

Six Month Filing Extension Deadlines

If you requested an extra six-month extension in April to file your 2018 personal income tax return, that deadline to file is coming up on Tuesday, October 15th.

If you are an employer that makes contributions into employee Simplified Employee Pension IRA accounts, October 15th is also the six-month extension deadline to make those deposits.

Higher Education Tax Credits – Did You Know?If you or any of your dependents are enrolled in a higher education program ...
09/30/2019

Higher Education Tax Credits – Did You Know?

If you or any of your dependents are enrolled in a higher education program this fall, you may qualify to claim one or more credits on your 2019 tax return.

The American Opportunity Tax Credit (AOTC) is a credit of up to $2,500 for a student pursuing a degree or certified credential at a college or vocational school. You may claim the credit for up to four years for each qualifying student, and you may claim multiple AOTCs if you have more than one student in your household. The AOTC is partially refundable, meaning that if your tax is reduced below zero, up to $1,000 of the credit may be refunded to you.

The Lifetime Learning Credit (LLC) is available for household members enrolled in one or more courses at a higher learning institution, or in a qualifying course to develop or improve professional skills. A maximum nonrefundable credit of $2,000 (regardless of the number of qualifying students) may be claimed per year, for any number of years.

Both credits are subject to income limits and other eligibility restrictions. A qualified tax advisor can help you determine your eligibility for both credits.

Age-Limited Child Tax Deductions – Did You Know?Several key tax credits end when a dependent child reaches a specified a...
09/24/2019

Age-Limited Child Tax Deductions – Did You Know?

Several key tax credits end when a dependent child reaches a specified age. Here is a quick summary of the age rules for three of the most important tax credits for parents, as well as the most important exceptions:

Child and Dependent Care Credit: Child must be under 13 years of age (12 years old or younger), OR live with you more than half the year and be incapable of self-care.

Child Tax Credit (also called “Per-Child Credit”): Child must be under 17 years of age (16 years old or younger), no exceptions.

Qualifying Child for the Earned Income Tax Credit (EITC): Child must be under 19 years of age (18 years old or younger), OR a full-time student and under 24 years of age (23 years old or younger).

For both the Child Tax Credit and the Qualifying Child for EITC rule, the child must meet the age requirement at the end of the tax year (usually, December 31). However, for the Child and Dependent Care Credit, the child only has to be below the age limit when the care is provided.

If you will lose a tax credit this year due to a child surpassing the age limit, you may need to adjust your withholding to allow for the likely increase to your total tax for the year. A qualified tax advisor can help you determine whether an adjustment is needed.

Teachers, Save Your School Supply Receipts – Did You Know?If you are a teacher, principal, counselor, or classroom aide ...
09/19/2019

Teachers, Save Your School Supply Receipts – Did You Know?

If you are a teacher, principal, counselor, or classroom aide who works at least 900 hours a year in a state-accredited school (grades K-12), you may qualify for the Educator Expense Deduction. This IRS rule allows you to deduct up to $250 on your tax forms ($500 for joint filers who are both educators) for classroom supplies that you purchase at your own expense.

Allowed expenses include traditional school supplies like rulers and markers, along with specialty items like athletic gear for physical education classes. A qualified tax advisor can help you determine which of your expenses qualify for the deduction.

You do not have to itemize deductions in order to claim the Educator Expense Deduction, but the IRS does require that you have written evidence for every expense. During this hectic back-to-school period when classroom expenses are most likely to occur, it is important to remember to save your receipts.

Estimated Taxes and Extended Return Filing DeadlinesFor individuals and corporations paying estimated taxes throughout t...
09/10/2019

Estimated Taxes and Extended Return Filing Deadlines

For individuals and corporations paying estimated taxes throughout the year, September 16th is the deadline for the third quarter installment.

For S Corporations and Partnerships that have an extension on their returns, September 16th is also the deadline for Forms 1120S (S Corporations) and 1065 (Partnerships).

September Tax Checkup – Did You Know?Making sure that the correct amount of tax is being withheld from your paychecks is...
09/03/2019

September Tax Checkup – Did You Know?

Making sure that the correct amount of tax is being withheld from your paychecks is the best way to avoid an unpleasant IRS surprise next spring. Here's a simple way to do a September withholding checkup:

- On your pay stub for the pay period ending August 31 or September 1, find your year-to-date federal income tax withholding. If the stub does not have this information, you can request it from your employer's payroll manager.
- Calculate two-thirds (66.67%) of the total federal income tax you paid for tax year 2018. Increase this percentage if you received a raise for (or during) 2019. For example, use 70% if you received a small raise, or 75-80% if you received a substantial raise.

The amount you found in step 1 should be greater than or equal to the amount you found in step 2. If it is not, you can obtain a new W-4 Form from your employer and request that an additional amount be withheld from your paychecks. The IRS also has a withholding calculator that can be found at: https://www.irs.gov/individuals/tax-withholding-estimator.

An experienced tax pro can help you determine what this amount should be. By adjusting your withholding now, you can spread out your tax payments over several months, instead of being stuck with one large, unexpected bill in April.

Address

567 Park Avenue, Suite 203
Scotch Plains, NJ
07076

Opening Hours

Monday 7am - 7pm
Tuesday 7am - 7pm
Wednesday 7am - 7pm
Thursday 7am - 7pm
Friday 7am - 7pm
Saturday 7am - 5pm

Telephone

+19084512016

Website

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