Because the tax code is complex and intertwined with federal and local laws, without proper tax preparation, many individuals miss out on deductions and tax credits that could significantly lower their tax liability. While software can identify some of the larger issues in a person’s tax return, no computer program can properly substitute a tax professional who is knowledgeable and invested in your unique financial situation.
Whether you are a business or an individual, tax preparation attorney Steve Thienel is experienced and knowledgeable in the tax code, with the acumen necessary to wade through the morass of complex codes to ensure his clients pay the least amount of tax allowable by the law.
Business Tax Preparation
Tax attorney Steve Thienel has years of experience preparing tax documents for any type of business entity, including LLCs, sole proprietorships, S-Corps and C-Corps. Whether you are a self-employed individual, sole business owner, or run a company with many employees, Thienel Law is prepared to apply our tax code expertise to your businesses’ financial situation.
The tax preparation for businesses is markedly different from individual taxes. Unlike individual taxes, businesses are typically required to prepare tax returns quarterly. Further, because businesses operate in terms of “profits” and “losses,” the influx and outward flow of money can be classified in different ways that can raise or lower your businesses tax burden.
Most information required from business tax returns is derived from financial records that need to be meticulously maintained so that your tax preparer can develop the best way to structure your businesses finances. While tax software may seem like a simple and cheap solution, the reality is that business taxes are much more complicated than individual taxes and typically require long-term strategic tax planning that a computer program simply cannot handle well.
Individual Tax Preparation
For many, individual tax preparation can be as complex as corporate taxes. Many different sources of income may need to be sorted through to ensure all income is represented. For those that operate on a freelance or contract basis, keeping track of expenses and deductions can be a nightmare. Steve Thienel can take the headache out of preparing your tax documents and ensure that you are compliant with the tax code.
Employee’s income is generally recorded on the IRS Form W-2. This form will include the employee’s name, the income paid to the employee over the last year by that employer, and an itemized list of federal and local taxes withheld.
Form 1098 is used to report home mortgage interest. If during the course of the year, the interest on your mortgage exceeded $600 then you may qualify for the mortgage interest deduction. For federal income tax purposes, a “mortgage” is a loan that is secured by a home. The “loan” that qualifies for a mortgage can include first or second mortgages, refinanced mortgages, and even home equity loans. A “home” is essentially any abode with a place for sleeping, cooking, and personal hygiene. This means anything from a condominium to a houseboat can qualify under the deduction.
This deduction is available to a taxpayer whether the benefit is used for a first home or a second home. However, the total amount of debt that can be used to calculate the yearly interest is capped at $1 million for 2017 and $750,000 for 2018 and beyond. This cap applies to all homes that the taxpayer has mortgaged, so the interest deduction cannot exceed the capped amount of debt for both homes, put together.
In an effort to encourage investing, the Internal Revenue Services taxes income derived from investments differently than employee income. In general, investment income is taxed at a lower rate. However, there are specific requirements in the tax code for when investment income can be taxed at a lower rate.
Capital Gains. A capital gain is the difference between the amount an asset is sold and the amount the asset was purchased. If the asset was purchased by the taxpayer less than one full year ago, then the tax code defines this as a “short-term capital gain.” Typically, short-term capital gains do not receive preferential tax treatment since, being sold within a single year, they are not technically an “investment.” However, there are exceptions and if the asset was not sold at a profit (the taxpayer lost money in the sale) then that loss could potentially lower the taxpayer’s total tax bill.
If the taxpayer held onto the asset for longer than a year before selling it, then the tax code deems it a “long-term” capital gain. These long-term capital gains will be taxed at a lower rate than an employee’s income. However, the exact rate depends on when the asset was purchased, when it was sold, and several other factors.
Pass-Through Income. Other investment income can receive preferential treatment through Schedule K-1 which deals with “pass-through” income. Income that is derived from profits that accrued to business partnerships, S-corporations, or trust and estate beneficiaries may be eligible for a lower tax rate than typical income.
Interest and Dividends. The other most popular form of investment income comes from interest and dividends received from corporate stocks and bonds. A dividend is a payment received from certain investments – typically corporate stocks or mutual funds. If these are held for a certain length of time, typically several months, then they will be taxed at the capital gains tax rate – again, instead of the higher tax rate applied to income. Taxpayers generally need to utilize 1099-DIV and Schedule B to take advantage of the lower rate on certain dividends.
In an effort to encourage Americans to save for retirement, retirement plans are also typically eligible for preferential tax treatment.
401(k). A 401(k) is one of the most popular retirement funds in America. A 401(k) is a retirement fund typically offered by private sector employers. An employee can choose to have a portion of his income withheld from his paycheck and instead directly deposited into his 401(k) account. An employee may divert a certain amount of money every year tax-free. The exact amount depends on the age of the employee, what other retirement accounts he or she has invested in during that year, and the amount contributed by his or her employer.
SEP IRA. A Simplified Employee Pension, or, as it more commonly referred to as a “SEP IRA,” is a less popular retirement fund. SEP IRA accounts are generally used by individuals that are self-employed or work for a small business. Like a 401(k), contributions to these funds are tax-deductible until a certain threshold is reached. That threshold depends on many different factors – including whether the employee also has a 401(k).
Traditional and Roth IRAs. The other two most popular vehicles for saving for retirement are Traditional and Roth IRAs. While both can be useful ways to reduce tax liabilities as an individual saves for retirement, the exact amount of contributions and the timing of when a person would like to have his or her tax liability reduced. In general, contributions to a traditional IRA are tax-deductible and the withdrawals from the fund are taxed. In comparison, a Roth IRA taxes any contribution to the fund but does not tax the later distributions.
Here are the most popular deductions utilized by Americans over the past few years:
Healthcare Expenses. In general, a taxpayer may deduct his or her medical expenses in excess of 10 percent of his or her yearly income. The list of healthcare expenses is fairly broad and can include acupuncture and air-conditioning if used for medical reasons.
Childcare Expenses. Parents who direct their income towards childcare expenses are typically eligible for a tax credit of 20 to 25 percent of the cost spend on childcare. Importantly, this tax credit is limited to $2,100 for each child under the age of thirteen. Consequently, for taxpayers with an employer that offers a Flexible Spending Account (FSA) for dependent-care, the maximum tax savings may come from the tax-free $5,000 in contributions allowed by the tax code.
Educational Expenses. Income that is used for educational expenses can qualify a taxpayer for both tax credits and tax deductions. A taxpayer that spends his income on “qualified educational expenses” at an institution of higher learning can deduct up to $4,000 in expenses. In addition, the American Opportunity Tax Credit reduces a taxpayer’s bill by up to $2,500 per qualifying student, per year.
International Tax Returns
International Tax Returns for American citizens. Americans are required to pay taxes on any income, regardless of where in the world it was earned. While the same rules generally apply regardless of where a taxpayer’s income was earned, there is a notable exception for income taxes paid to a foreign government. While there are exceptions to this rule, income taxes paid to a foreign government for money was earned in that country typically is either tax-deductible or a credit against US taxes owed.
International Tax Returns for Non-Citizens in America. Any non-citizen that is engaged in a trade or business in America is required to file a tax return with the Internal Revenue Service unless he or she earned less than the “personal exemption” amount. However, if the non-citizen taxpayer paid more than this amount then he or she should look into whether the deductions and credits available to him could entitle him or her to a refund.
Experience You Can Trust
Tax preparation attorney Steve Thienel is dedicated to effective tax preparation for any person, business, or legal entity. With knowledge of the complex and overlapping realms of the tax code and business law or estate planning, Thienel Law can ensure all of your tax obligations are satisfied in the most effective manner.