Cassidy Tax Preparation

Cassidy Tax Preparation Do you think that you pay too much to have your tax return completed and filed electronically? If you go to one of the "big box" preparers you probably do.

Do you want personal service where you are able to ask questions and not feel that you are being rushed out the door. Then perhaps you need the services of my company. Feel free to email me or for that matter give me a call to discuss your particular situation.

01/04/2025

Get Ready for the 2024 Tax Season: Essential Steps for a Smooth Filing Experience

The new year has arrived, and with it comes the task of preparing your tax returns. Being proactive and organized can save you time, money, and stress when filing. To help you get ready, I’ve outlined essential steps you should follow to ensure a smooth tax filing experience in 2024.

1. Gather Your Tax Documents Early

Start by collecting all necessary documents. This includes:

Income Statements: W-2s, 1099s, K-1s, etc.

Investment Income: 1099-DIV, 1099-INT, 1099-B

Retirement Account Information: 1099-R, contributions to IRAs

Self-Employment Income: Business income records, 1099-NEC

Property Ownership: Mortgage interest (Form 1098), property tax receipts

Other Income: Social Security (SSA-1099), unemployment income, etc.

Pro Tip: Use a folder or digital system to store documents as they arrive.

2. Review Life Changes in 2023

Life events can significantly impact your tax situation. Be sure to account for:

Marriage or Divorce

Birth or Adoption of a Child

Buying or Selling a Home

Job Changes

Starting a Business

Major Medical Expenses

These events may introduce new deductions, credits, or filing requirements.

3. Maximize Deductions and Credits

Ensure you’re aware of deductions and credits that apply to your situation. Common ones include:

Child Tax Credit

Earned Income Tax Credit

Education Credits (American Opportunity and Lifetime Learning Credits)

Medical and Dental Expense Deduction

State and Local Taxes (SALT) Deduction

Charitable Contributions

For my clients, I can help review your eligibility for these credits and deductions during our tax prep session.

4. Organize Business and Self-Employment Records

If you are self-employed or own a small business, you’ll need to prepare:

Profit and Loss Statement

Receipts for Business Expenses

Mileage Logs

Home Office Deduction Details

Estimated Tax Payments

Keeping accurate records ensures you can claim all eligible expenses and reduces audit risks.

5. Verify Personal Information

Ensure that all your personal information is up to date:

Social Security numbers for you, your spouse, and dependents

Bank account details for direct deposit of refunds

Mistakes in these areas can cause delays in processing your return.

6. Review Prior Year’s Tax Return

Looking at your 2023 tax return can provide insights into what you may need this year. It can also help identify carryover items, such as:

Capital losses

Charitable contribution carryovers

Net operating losses (NOLs)

7. Make Use of Tax Software or Professional Services

While some taxpayers may choose to use tax software, working with a professional ensures that you get the maximum refund or minimize your tax liability. I offer personalized tax preparation services to help navigate complex situations and make sure you’re fully compliant.

8. Be Aware of Deadlines

Here are key dates to keep in mind:

January 31, 2024: Deadline for employers to send W-2s and 1099s

April 15, 2024: Filing deadline for most taxpayers

October 15, 2024: Extension filing deadline (if applicable)

Missing these deadlines can result in penalties, so mark your calendar!

9. Consider Making an IRA Contribution

You have until April 15, 2024, to contribute to an IRA for the 2023 tax year. Contributing to a Traditional IRA may reduce your taxable income, while a Roth IRA offers future tax-free withdrawals.

10. Watch for IRS Updates

Tax laws change frequently. Keep an eye out for updates from the IRS, especially regarding any new credits, deductions, or changes to filing procedures. I will also keep you informed of significant updates that may affect your return.

Final Thoughts

By following these steps, you can make your tax preparation easier and more efficient. As always, I am here to help. Whether you have questions, need clarification, or want to schedule your tax prep session, don’t hesitate to reach out.

Let’s make the 2024 tax season your smoothest one yet!

12/14/2023

The Residential Clean Energy Credit, previously known as the Residential Energy Efficient Property Credit, is a tax incentive offered by the United States government. This credit is part of the efforts to encourage homeowners to switch to renewable energy sources. Here are the key aspects of this credit:

Eligible Technologies: It covers various renewable energy technologies, including solar electric systems, solar water heaters, fuel cells, small wind energy systems, and geothermal heat pumps.

Credit Amount: The credit rate has varied over the years. For installations completed after 2022 and before 2035, the credit is 30% of the cost of eligible installations.

Eligibility Criteria: The credit is available to taxpayers who install eligible renewable energy equipment in their homes. Both primary residences and second homes qualify, but rentals do not. The credit applies to both new constructions and existing homes.

Installation Requirements: The equipment must meet specific performance and quality standards to be eligible. For example, solar panels and wind turbines must generate electricity for use in the residence, and solar water heaters must be certified for performance.

Carryover Provisions: If the credit is more than the tax owed in a given year, the excess amount can be carried forward to the next tax year.

Expiration Date: The credit is currently available through 2034, with a gradual step-down in the credit rate starting in 2033.

Claiming the Credit: Taxpayers can claim the credit on their federal income tax returns. The credit is a direct reduction of tax liability, not a deduction from taxable income.

This credit is part of a broader strategy to promote clean energy and reduce reliance on fossil fuels, contributing to environmental conservation and sustainability efforts. It is always advisable to consult with a tax professional or refer to the latest IRS guidelines for the most current information and detailed eligibility criteria.
This credit focuses on what may be the most popular of the technologies being Solar Panels. It is part of the Inflation Reduction Act of 2022 which also includes two additional Credits. The others being Energy Efficient Home Improvement Credit which changes the credit for Insulation, Exterior windows and skylights as well as Exterior Doors. Anyone contemplating making changes needs to understand how these work as they do contain limitations.
And finally, there are Credits that effect Electric Vehicles.
I will provide more on these last two credits in my next post.

12/04/2023

The Affordable Care Act (ACA), commonly known as Obamacare, has brought significant changes to the American healthcare system since its inception. This legislation has been pivotal in expanding healthcare access, improving quality, and reducing costs for millions of Americans. Here's an exploration of the benefits of the ACA, focusing on the concept of subsidies and its impact on families.

Expanded Access to Healthcare
The ACA has substantially increased the number of Americans with health insurance. By expanding Medicaid and establishing health insurance marketplaces, it has made coverage more accessible, especially for low and middle-income families. This expansion has been vital in reducing the number of uninsured Americans.

Subsidies: A Key Feature
One of the cornerstones of the ACA is the provision of subsidies. These subsidies, which come in the form of premium tax credits, are designed to make health insurance more affordable for people with incomes between 100% and 400% of the federal poverty level. These tax credits can be used in advance to lower monthly premiums, making healthcare immediately more accessible and affordable.

Impact on Families
The ACA's subsidies have had a profound impact on families, particularly those who struggled to afford health insurance in the past. Millions of families have benefited from reduced premiums and better coverage, which has resulted in improved health outcomes and financial security. This is especially important for families with chronic health conditions, who now have better access to necessary treatments and medications.

Pre-Existing Conditions Coverage
A significant benefit of the ACA is the protection it offers to individuals with pre-existing conditions. Before the ACA, health insurers could deny coverage or charge higher premiums to people with pre-existing health conditions. The ACA prohibits this practice, ensuring that all individuals, regardless of their health status, have access to insurance.

Improved Quality of Care
The ACA also focuses on improving the quality of healthcare. It promotes preventive care by requiring most insurance plans to cover preventive services without any cost-sharing. This includes vaccinations, screenings, and annual check-ups, which are essential in preventing and managing diseases.

Young Adults on Parents' Plans
The ACA allows young adults to stay on their parents' health insurance plans until age 26. This provision has given millions of young adults access to health insurance during a transitional period of their lives when they might otherwise be uninsured.

Challenges and Criticisms
Despite its benefits, the ACA has faced challenges and criticisms. Some argue that premiums are still too high for some families, and there are concerns about the long-term sustainability of the ACA's funding mechanisms. However, the overall impact of the ACA in expanding healthcare access and improving health outcomes is undeniable.

Conclusion
In conclusion, the ACA has made significant strides in reforming the American healthcare system. Its emphasis on subsidies has made health insurance more affordable and accessible, particularly benefiting low and middle-income families. While challenges remain, the positive impact of the ACA on the lives of millions of Americans is a testament to its importance and success.

11/17/2023

Just to carry our prior post to an additional step: Let suppose that our taxpayer was eligible for and made a $6,000 contribution to an IRA. Here is that computation:
Total Income $50,000 (same as before)
IRA Contribution $6,000 (assuming it's a traditional IRA, which allows for tax-deductible contributions)
Standard Deduction $12,550 (as in the previous example)
Steps for Tax Calculation:
Calculate Adjusted Gross Income (AGI)
AGI=Total Income-IRA Contribution
AGI= $50,000-$6,000=$44,000
Calculate Taxable Income:
Taxable Income=AGI- Standard Deduction
Taxable Income= $44,000-$12,550=$31,450
Apply Tax Brackets (assume the same tax brackets as before)
First $10,000 taxed at 10%: $10,000 x 10%= $1,000
Remaining $21,450 ($31,450-$10,000) taxed at 12%:$21,450 x 12%=$2,574
The taxable income doesn't reach the 22% bracket.
Total Tax Due:
Total Tax= $1,000 (from first tax bracket) + $2,574 (from the second tax bracket)
Total Tax= $3,574.
By contributing to an IRA, the taxpayers reduced their taxable income from $37,450 to $31,450. This not only lowers the total tax due but also keeps the taxpayer entirely within a lower tax bracket, resulting in a lower effective tax rate. (7.14%)
This example highlights how tax-advantaged accounts like IRA's can be beneficial for reducing taxable income and, consequently, the overall tax liability. It's important to note that this is a simplified illustration, and actual tax computations might include other factors such as additional deductions, tax credits, or specific circumstances that affect individual tax situations.

11/15/2023

Perhaps the most misunderstood thing about taxes is the computation of the actual tax itself. I find in talking to clients that they believe that whatever tax bracket they fall into that all of their income will be taxes at that percentage. Not so! Here is an example of how the tax is actually computed.
Let's say you are Single and earn $50,000 in 2023. The federal tax brackets for a Single filer in 2023 might look something like this (hypothetical rates for illustration):
10% on income up to $10,000
12% on income over $10,000 up to $40,000
22% on income over $40,000 up to $85,000
And let's assume the Standard Deduction for a Single Filer is $12,550. Here's how the tax is calculated:
Total Income $50,000
Subtract Standard Deduction: $50,000-$12,550=$37,450 (taxable income)
Apply Tax Bracket:
First $10,000 taxes @ 10% $10,000x10%=$1,000
Next $27,450 ($37,450-$10,000) taxes @ 12%: $27,450 x 12%=$3,294
Since your taxable income doesn't exceed $40,000, the 22% isn't used.
Total tax due: $1,000 +$3,294=$4,294
So, your effective tax rate would be $4,294/$50,000=8.59%, which is lower than your marginal tax rate of 12%.
Hope that this post will provide a better understanding of this commonly misunderstood aspect of the tax code.
If you find this helpful, please passing it on to friends and relatives. Would appreciate your feedback.
Best
Mike

02/02/2023

Tax Credit or Tax Deduction?
What is the difference!
A tax credit is a dollar for dollar REDUCTION of the amount of tax owed, while a tax deduction reduces the taxable income, thus lowering the amount of tax owed. In other words, a tax credit directly reduces the tax liability, while a tax deduction reduces the taxable income which in turn reduces the tax liability. Tax Credits are generally MORE valuable than tax deductions because they directly reduce the tax owed, rather than simply reducing the taxable income.

01/31/2023

If you receive a Form 1099-k take the following steps:
1) Review the form to ensure accuracy of the information
2) Determine if the income reported on the form is taxable
3) Report the income on your tax return
4) Keep a copy of the form for your records.
It's important to keep in mind that just because you receive a
Form 1099-k does not necessarily mean that the income is taxable.

01/29/2023

The 2022 Tax Season has Officially started:
Some members of Congress have advocated doing away with the IRS and the current tax law and replacing it with a National Sales Tax.
My opinion! A National Sales Tax is bad for most American families because it disproportionately affects low-and middle income households. The tax applies all purchases, so essential items such as food and clothing consume a larger portion of their income. Additionally, it can be regressive, meaning those with lower incomes pay a higher proportion of their earnings compared to those with higher incomes This tax system can also discourage spending and slow down the economy.

12/04/2022

Just completed my Annual Tax Season Update Seminar. The issue which will probably effect more taxpayers on their 2022 returns is the change in the tax law regarding Form 1099-k. If, for example, you sell items on eBay and the amount paid to you is $600 or more you will receive a 1099-k.This is a significant change from the prior year. DO NOT ignore this form if you should receive it. IRS also receives a copy and will be looking on your tax return for reporting of this amount. Failure to report this will result in a letter from IRS telling you that you have underreported your income. No one wants to deal with this!
The second item of concern is Virtual Currency! The IRS does not consider Crypto to be a currency but rather consider it to be property. Thus, you must report any transaction in Crypto the same as you would with property.

01/28/2022

Taxpayer who filed a paper return for 2020 may still be waiting for their refunds. In the past weeks the IRS has been sending these people a notice telling them that they have failed to file the returns. No doubt, their returns are in the more than 6 million unprocessed 2020.
The moral of the story is this: File Electronically and request that your refund be Direct Deposit to your bank account.

01/24/2022

The IRS will begin to accept tax returns for 2021 today. Just a word of WARNING! Before filing be sure that you have all your documentation. You will need the amount paid to you on the Third Stimulus Payment and well as Advance Payments received on the Child Tax Credit. If these are not correct your return will be pullled and any refund that you are entitled to will take months to receive.
FILE ELECTRONICALLY and have your refund AUTOMATICALLY sent to your Bank Account by DIRECT DEPOSIT.

01/19/2022

In a letter to attendees at the World Economic Forum's. annual meeting in Davos, Switzerland, Morris Pearl, a former managing director of Black Rock urged his fellow millionaires and billionaires to try to persuade other rich people to pay higher taxes. Wage earners pay proportionately more tax than those with passive income. (We mentioned how Capital Gains and Qualified Dividends were taxed in a prior post) "To put it simply, restoring trust requires taxing the rich," the letter to Davos attendees reads."Rich people are killing the goose that lays the golden egg," Pearl said.
Most wealthy have grown even wealthier during the pandemic, while many suffered, the signatories foresee an unhappy ending if changes are not made: : It's taxes or pitchforks. Let's listen to history and choose wisely".

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