Category Archives: Taxes

This blog discusses important tax compliance and planning issues for privately-held businesses.

179D Federal Energy Tax Deductions

If you own a building you may be overlooking a very important tax deduction that can, if applicable, can provide substantial tax savings for your business.

What is this little known tax break? Section 179D. This is the section of the tax code that provides a benefit for businesses when they build or renovate a building (or design a government building in the case of an architect, engineering or contracting firm) that is energy efficient. The deduction can be up to $1.80 per square ft.

New Buildings

Most states now require that new buildings surpass 2001 ASHRAE standards. If the building does, it will qualify or partially qualify for 179D.

Building Improvements

As building owners, you know that many systems in the building require periodic replacement long before they are fully depreciated such as HVAC/hot water systems, interior lighting systems, etc. There are a number of ways that these building improvement can qualify or partially qualify for the 179D tax deduction.

Attention Architects, Engineers and Contractors

The tax law provides that a government agency (federal, state or local) can allocate the 179D tax benefits to the architect/engineer/contractor engaged in designing and building government buildings. The architect, engineer or contractor is assigned the tax benefit from the government agency. In fact, you can go back three years and obtain this benefit. Meaning that you can review government buildings you helped design or build that were placed in service in the last three years — receive an allocation letter from the government and amend your tax returns and obtain the 179D benefits.

Building Owners & Tenants

The owner of the building or improvement can go back to buildings put in service or improvements made in the last six years – – and they will qualify for 179D. The building owner takes the deduction in the current year and reduces the basis in the building or improvement. For building owners, 179D provides a potentially significant timing benefit in paying taxes.
Tenants can also qualify if the tenant paid for and owns the improvement.

What qualifies?
• Commercial buildings (any size).
• Apartments, four+ stories, for lease.
• Commercial energy renovations.

What is the time frame for eligibility?
Units must be completed or renovated after December 31, 2005 but before December 31, 2014.

 

For more information, contact your Dugan & Lopatka CPA at (630) 665-4440.

If You Take Care of Your Parents, You May Get Tax Breaks

When you’re focused on the rewards and stresses of taking care of a parent or family member who can no longer manage on their own, it’s likely you’re not thinking of tax benefits. Yet you might qualify for breaks that can reduce your year-end bill.

Here are three benefits to keep in mind as you gather information for your 2014 federal income tax return.

* Dependency exemption. Did you provide over half the support for a loved one during 2014? If so, and that person’s income is less than $3,950, you may be able to claim a dependency exemption. Remember that tax-exempt social security is not included when figuring your loved one’s income.

Tip: This break is also available even if the dependent parent lived in a nursing home during the year.

For 2014, the amount you can claim for each dependent is $3,950. More than one family member can qualify as a dependent as long as the income and support tests are met.

* Medical expense deduction. When you itemize, you can claim expenses you paid for a dependent relative. If you provide over 50% of the support for your relative, the expenses may be deductible even when that person is not a dependent.

What happens if you can’t meet the 50% threshold? When medical expenses are paid by multiple family members, you can choose who gets the deduction by completing a multiple support agreement (Form 2120).

* Dependent care credit. You may be eligible for the dependent care credit when you pay for home care or daycare for a physically or mentally disabled person who lives with you. You must have earned income to claim the credit, which can be as much as $1,050 in 2014.

Please give us a call if you would like details about tax benefits available to caregivers.

Self-Employment Tax Breaks

When it comes to taxes, being self-employed has some advantages. Whether you work for yourself on a full-time basis or just do a little moonlighting on the side, the government has provided you with a variety of attractive tax breaks.

  • Save for retirement. When you’re self-employed, you’re allowed to set up a retirement plan for your business. Remember, contributing to a retirement plan is one of the best tax shelters available to you during your working years. We recommend that you take a look at the SIMPLE IRA, SEP IRA, or Solo 401(k), and determine which plan works best for you.
  • Hire your kids. If your business is unincorporated, employing your child under the age of 18 might make sense. That’s because your child’s earnings are exempt from social security, Medicare, and federal unemployment taxes. This year, your son or daughter can earn as much as $6,200 and owe no income taxes. You get to deduct the wages paid as a business expense.
  • Deduct insurance. Are you paying your own medical or dental insurance? How about long-term care insurance? As a self-employed individual, you may be able to deduct 100% of the cost of these premiums as an “above the line” deduction, subject to certain restrictions.
  • Take business-use deductions. Self-employed individuals can also deduct “mixed-use” items directly against their business income. Use your car for business and you can deduct 56¢ per business mile driven. The business-use portion of your computer purchases, Internet access, and wireless phone bills is also allowable. And if you meet the strict requirements, claiming the home office deduction makes a portion of your home expenses tax-deductible.

Please give us a call to find out more about the tax breaks available to self-employed individuals.

Get a Tax Break from Selling Vacant Land

You probably know that you can exclude up to $250,000 of gain ($500,000 for most joint filers) when you sell your principal residence. IRS regulations may now allow you to apply this gain exclusion when you sell vacant land that is adjacent to your home.

To qualify, the land you sell must be adjacent to the parcel on which your house sits. Also, the land sale must occur within two years before or after the residence is sold. You must meet the other usual requirements for claiming the exclusion. If you qualify, you can apply your $250,000 or $500,000 exclusion to both sales combined.

Example: You own and live in a house which sits on four acres. You decide to sell the house on a one-acre lot and sell the other three acres of empty land to a developer. Provided the land sale occurs within two years before or after you sell the house, you can exclude up to $250,000 ($500,000 if you file jointly) of the combined gain from both sales.

Tax Tips for Your Child’s Summer Job

Is your child taking a job this summer? If so, you both may have questions about taxes. The following information may be helpful.

For 2014, your child can earn as much as $6,200 and not pay a dime in federal income taxes. If your child’s earnings won’t exceed this amount, consider having the child claim “student – exempt” when completing the federal withholding allowance certificate (Form W-4). If this is the child’s only income and the total doesn’t exceed the $6,200 limit, he or she then won’t have to file a 2014 tax return.

Don’t overlook the fact that there will still be withholding from your child’s paycheck for social security and Medicare taxes. But those payments are not income taxes, and they cannot be refunded to the child.

Keep in mind that self-employment income, tips, and interest, dividends, and stock sales can affect your child’s tax return filing requirement.

Realize also that as long as you provide more than half of your child’s support, you can continue to claim the child as an exemption on your tax return. Your child will lose his or her exemption, but that exemption deduction is typically more valuable to you than to your child.

If you need more details about the tax implications of your child’s summer job, give us a call. We’re happy to help.

Will Your Tax Return Trigger An Audit? Elgin Accountants Weigh In

If you’ve never been audited by the IRS, consider yourself fortunate. Even if you’ve done nothing wrong and your tax return filings have all been done properly, going through an audit by the Internal Revenue Service can be grueling. That’s one reason why our Elgin accountants work closely with both individuals and companies to ensure that potential triggers are avoided and the paperwork is done correctly and filed in a timely manner. But even with the best possible preparation, you may be subjected to an audit at some point because something on your return triggered the government’s curiosity.

Common Audit Triggers

The IRS reviews millions of returns every year looking for signs that an individual or company may be inaccurately reporting income or taking advantage of loopholes. The following are a few common red flags they look for.

Increased Income

If your income suddenly jumps up or your salary passes the $250,000 mark, the IRS will take notice and is more likely to scrutinize your return carefully, particularly if there was a dramatic upturn in your income versus previous years.

Income That Isn’t Salaried

If you are paid basic wages or earn a salary, chances are you won’t be investigated as long as you have the appropriate W-2s filed with your return, but income that comes from freelance or contract work will be scrutinized, so be sure you have all the necessary 1099’s and that you’ve paid the appropriate quarterly taxes.

Questionable Itemized Deductions

If you operate a home business, there are plenty of acceptable deductions you can take, but if your deductions seem high in comparison to your profits, it’s a red flag. Be sure you don’t overstate how much of your house is used solely as a home office and don’t deduct excessive amounts for meals and entertainment. Another deduction that is often questioned is excessive use of a car for business purposes. Talk to Dugan & Lopatka‘s accountants in the Elgin area to determine what the appropriate deduction guidelines are for deducting items like a home office or an automobile you use for business.

Investment Income That’s Not Accounted For

If you receive a 1099 listing how much you made from your investments or even from winning at the casino, you can be sure that the government received the same information. If you forget to report that income, the IRS will be happy to remind you. It’s better to be up front in the first place.

Large Charitable Donations

If you donate anything over $250 to a charity, you’ll need to produce a cancelled check or a dated, signed receipt if you are audited. The higher your charitable donations, particularly relative to your income, the higher your odds of being audited. Non-cash contributions in general are suspect, particularly if they are valued at more than $5000, so be sure you have the item appraised by a professional before donating it.

Healthcare Expenses

Healthcare or medical expenses can be deducted only if they are equal to or greater than 10% of your gross income. If you do have high medical expenses, make sure you keep copies of every receipt, every bill and any other documentation of what you’ve spent. Over-the-counter medications and health club fees are just a few of the items that can’t be included in your deductions, so be sure you confer with one of our accountants in Elgin if you’re considering deducting medical expenses. We can determine what can and can’t be included.

Our Accountants In Elgin Can Help You During An Audit

If you’re worried about the possibility of an audit, it may be time to talk to one of our Elgin accountants at Dugan & Lopatka. Just fill out our simple contact page and one of our accountants will call you.

Dugan & Lopatka: Beyond Tax Preparation In Naperville, IL

Important Services That Help Dugan & Lopatka Go Beyond Tax Preparation for Businesses In Naperville, IL

Here at Dugan & Lopatka, we often surprised to learn that some accounting firms in Naperville, IL work with clients strictly for tax preparation. Whether it’s to offload a year’s worth of receipts or to carefully go through their annual revenues and expenditures, these particular clients initially assume that our specific usefulness to their business is only relevant until tax season is over. After we’ve completed their tax preparation in Naperville, IL, they think that they won’t need our services again until the next time their tax deadline looms before them.

Tax preparation accounting firm Dugan & Lopatka, CPAs shares a wonderful image of the Naperville carillon in early fall.

Dugan & Lopatka Offers Far More Than Services For Traditional Tax Preparation In Naperville, IL

Our clients tell us that the team at Dugan & Lopatka delivers superior services for traditional tax preparation in Naperville, IL. From annual tax filings to tax audits and everything in between, our team of highly trained and skilled tax accountants has the experience needed to help your business successfully navigate through the tax preparation process. However, it’s important to note that, as a leading accounting firm in Chicago’s suburbs, Dugan & Lopatka offers far more than just high quality tax preparation in Naperville, IL. We also offer an extensive range of specialized core competencies designed to help Naperville business owners position their company for maximum financial growth.

Naperville accountants Dugan & Lopatka, CPAs shares a wonderful image of the Naperville Riverwalk fountain in Summer.

What You Can Expect When You Partner With Dugan & Lopatka

If you’re ready to partner with a team of accountants who specialize of closely-held small and mid-size businesses, the team at Dugan & Lopatka can help. We proudly offer an wide range of services that can mean the difference between your business just getting by or thriving.

Our specialized services include:

Succession/Ownership Transition Planning: Are you at the point in your business life where you’re considering your exit strategy? The team at Dugan & Lopatka can work with you during each phase of your successful plan so you know everything you’ll need for a seamless, stress-free business ownership transition.

Cost Segregation: If you just purchased a building in Naperville, remodeled or built a building, you may be entitled to accelerate the depreciation of the building and reap the tax rewards by doing so through a process called Cost Segregation. If you’re not partnered with a team who understands cost segregation’s specific nuances. Dugan & Lopatka has the expertise and experience you’ll need to get the tax savings out of your building that you’re entitled to.

Business Valuation Services: Having a clear understanding of exactly what your company is worth is important. Dugan & Lopatka can take all the guesswork out of your business valuation.

Bank/Lender Covenants: In today’s tighter banking regulatory environment, the lending rules are constantly evolving leaving debtors overwhelmed with various bank covenants attached to their loans. Partnering with Dugan & Lopatka means that you’ll have a highly skilled team of experts working with you to understand the terms of all your loans and help you monitor your compliance with those terms so can avoid accidently breaking a covenant.

Want to hear more about Dugan & Lopatka’s extensive list of specialized accounting services? Visit our website at http://www.duganlopatka.com today.

Employers Have New Withholding Obligations

Employers have a new withholding obligation

The Medicare tax that employees pay on their wages increases this year from 1.45% to 2.35% on earnings over $200,000 for singles and $250,000 for married couples.

Employers are required to withhold the additional tax from wages exceeding $200,000, regardless of the individual’s marital or filing status. They are not required to inform employees when they begin the additional withholding, nor are they required to match the additional withholding. Employers who fail to do the required withholding may be subject to penalties, in addition to the tax.

 

Don’t Fall for Bogus IRS e-Mails

Don’t fall for bogus IRS e-mails

Crooks wanting to steal your identity are using bogus e-mails and websites designed to look like genuine IRS communications. You might expect the April 15 filing deadline to mark the end of these scams, but they, in fact, are expected to continue for months.

An example of these bogus e-mails: You receive a message confirming IRS receipt of your tax return, but the IRS needs more information to process your return. The e-mail looks official and completely legitimate. But it isn’t. The IRS does NOT contact taxpayers asking for personal and financial information. These e-mails should be deleted immediately. Fake IRS websites are also created by scammers to lure victims into filling out forms providing information that results in identity theft.