Summertime
offers unique tax saving situations. Outlined here are five ideas
everyone can use. Plus, this issue includes ideas to help you unplug
from your electronics and discusses possible payroll fraud schemes.
Finally, spend a minute reviewing the wisdom of asking for help should
you be contacted by the IRS.
Call if you would like to discuss how
any of this information relates to you. If you know someone that can
benefit from this newsletter, feel free to send it to them.
This month
- June 16: Father’s Day
- June 17: 2nd qtr estimated taxes due
- June 17: 2018 tax deadline for U.S. citizens living abroad
- 5 Summer Tax Savings Opportunities
- Get Your Life Back! Ideas to Unplug
- Payroll Fraud Schemes Every Business Should Know
- Never Take on the IRS Alone
5 Summer Tax Savings Opportunities
Ah, summer. The weather is warm, kids are out of
school, and it’s time to think about tax saving opportunities! Here are
seven ways you can enjoy your normal summertime activities and save on
taxes:
- Rent out your property tax-free.
If you have a cabin, condo, or similar property, consider renting it
out for two weeks. The rental income you receive on property rented for
less than 15 days per year is not considered taxable income. In
addition, you can still deduct your mortgage interest expense and
property taxes in full as itemized deductions!. Track the rental days
closely — going over 14 days means all rent is taxable and rental income
rules apply.
- Take a tax credit for summer childcare.
For many working parents, the summer comes with the added challenge of
finding care for their children. Thankfully, the Child and Dependent
Care Credit can cover 20-35 percent of qualified childcare expenses for
your children under the age of 13. Eligible types of care include day
care, nanny fees and day camps (overnight camps and summer school do not
qualify).
- Hire your kids.
If you own a business, hire your kids. If you are a sole proprietor and
your child is under age 18, you can pay them to work without
withholding or paying Social Security and Medicare tax.
- Have a garage sale.
In general, the money you make from a yard or garage sale is tax-free
because you sell your goods for less than you originally paid for them.
Once the sale is over, donate the remaining items to a qualified charity
to get a potential charitable donation deduction. Just remember to keep
a log of the items you donate and ask for a receipt.
- Start a Roth IRA for your children.
Roth IRA contributions are limited to the amount of income your child
earns, so earned income is key. This can include income from mowing
lawns or selling lemonade. Start making contributions as soon as your
child makes some money to take advantage of the tax-free earnings
available in a Roth IRA.
Taking the time this summer to
execute these tips can put extra money in your pocket right away and
provide you tax-saving happiness in the future.
Get Your Life Back! Ideas to Unplug
With endless movies, TV shows and video games
available to us 24/7, it’s become too easy to spend all our free time on
electronic devices. If you and your family are looking for ways to
unplug this summer, consider these ideas:
- Turn off notifications.
Hey!
Guess what? Bill just posted a photo of his dinner! And look at this!
Minneapolis just set the world record for the largest pillow fight!
Let’s be honest, most alerts you get on your phone are meaningless, yet
we allow them to steal our attention several times a day. Review your
phone settings and turn off all non-essential notifications to keep you
focused on the things that are important to you.
- Ration your screen time.
Limiting time in front of a screen is important for both you and your
kids. Setting daily screen limits is a good way to keep your media
consumption under control and allow for guilt-free time when you just
want to scroll through social media or watch a movie.
- Make a summer reading goal.
Set a goal (with prizes at the end!) for yourself and your children to
read a certain number of books before Labor Day. According to the
Chicago Tribune, because reading is an active activity (not passive,
like watching TV), “it reduces stress, promotes comprehension and
imagination, alleviates depression, helps you sleep, and may contribute
to preventing Alzheimer’s.”
- Schedule phone-free activities.
Plan a get-together like a picnic or BBQ, but with a catch — phones
need to be checked at the door. That way you and your guests can focus
on each other without the constant distraction of a phone. If some of
the guests don’t know each other, even better! They might leave the
party with a few new friends.
- Start a new outdoor hobby.
Getting outside is a great way to separate yourself from your
electronics. By finding an outdoor hobby that interests you, like
hiking, gardening or camping, you’ll have an activity that takes your
attention away from your phone and provides added benefits, like
exercise and vitamin D.
By getting your electronic habits to a manageable level, you’ll free up more time and energy to live this summer to the fullest.
Payroll Fraud Schemes Every Business Should Know
According to the Association of Certified Fraud
Examiners, nearly 30 percent of businesses are victims of payroll
malfeasance, with small businesses twice as likely to be affected than
large businesses. Here are four scary payroll fraud schemes you need to
know:
- Ghost employees.
A ghost employee does not exist anywhere except in your payroll system.
Typically, someone with access to your payroll creates a fake employee
and assigns direct deposit information to a dummy account so they can
secretly transfer the money into their own bank account.
- Time thieves.
Time stealing happens when employees add more time to their timecard
than they actually worked. Sometimes multiple employees will team up to
clock each other in earlier than when they arrive or later than when
they depart for the day.
- Shape-shifting commissions.
In an attempt to bump up a commission payment or attain a quota, sneaky
sales employees may alter a sales contract to their benefit. A typical
tactic used by a dishonest salesperson is to make a booked sale appear
larger than it is and then slide a credit memo through the system in a
later period. Companies with complicated commission calculations or weak
controls in this area are the most vulnerable.
- External swindlers.
A popular scam, known as phishing, starts with a fraudster
impersonating a company executive through email or over the phone asking
an employee with access to payroll data to wire money or provide
sensitive information. These imposters can make the correspondence look
very real by using company logos, signatures and email addresses.
Tips to combat payroll fraud
Being
aware of the threats is a start, but you also need to know how to stop
them. Here are some tips to reduce your companies payroll fraud risk:
- Better internal controls.
While most employees are trustworthy, giving too much control over your
payroll to one person is not a good idea. Separating payroll duties and
formalizing an approval process protects both your business and your
employees.
- Review payroll records.
Designate
someone outside of the payroll-processing department to periodically
review the payroll records. Have them review names, pay rates and verify
that the total payroll matches what was withdrawn from the business
bank account.
- Perform random internal audits.
During an internal audit is when you can really get into the details to
look for potential payroll fraud. You can do an in-depth review of the
whole payroll system or select a random sample of dates and employees.
Keep the timing of the audit under wraps to prevent giving someone the
chance to cover up their misdeeds.
Managing your business
payroll is a daunting task by itself, and actively protecting against
fraud adds additional complexity. Please call for help with your
business payroll needs.
Never Take on the IRS Alone
Sleuthing your way through a tax audit by yourself is
not the same as fixing a leaky faucet or changing your oil. Here are
reasons you should seek professional help as soon as you receive a
letter from the IRS:
- IRS auditors do this for a living — you don’t.
Seasoned IRS agents have seen your situation many times and know the
rules better than you. Even worse, they are under no obligation to teach
you the rules. Just like a defendant needs the help of a lawyer in
court, you need someone in your corner that knows your rights and
understands the correct tax code to apply in correspondence with the
IRS.
- Insufficient records will cost you.
When selected for an audit, the IRS will typically make a written
request for specific documents they want to see. The list may include
receipts, bills, legal documents, loan agreements and other records. If
you are missing something from the list, things get dicey. It may be
possible to reconstruct some of your records, but you might have to rely
on a good explanation to avoid additional taxes plus a possible 20
percent negligence penalty.
- Too much information can add audit risk.
While most audits are limited in scope, the IRS agent has the authority
to increase that scope based on what they find in their original
analysis. That means that if they find a document or hear something you
say that sounds suspicious, they can extend the audit to additional
areas. Being prepared with the proper support and concise, smart answers
to their questions is the best approach to limiting further audit risk.
- Missing an audit deadline can lead to trouble.
When you receive the original audit request, it will include a response
deadline (typically 30 days). If you miss the deadline, the IRS will
change your tax return using their interpretation of findings, not
yours. This typically means assessing new taxes, interest and penalties.
If you wish your point of view to be heard — get help right away to
prepare a plan and manage the IRS deadlines.
- Relying on an expert gives you peace of mind.
Tax audits are never fun, but they don’t have to be pull-your-hair-out
stressful. Together, we can map out a plan and take it step-by-step to
ensure the best possible outcome. You’ll rest easy knowing your audit
situation is being handled by someone with the proper expertise that
also has your best interests in mind.
As always, should you have any questions or concerns regarding your tax situation please feel free to call.