Author: Alan Mendelson

One of the important things to remember when you file your taxes each year is that there is a standard deduction and there are itemized deductions.

The standard deduction amount increases slightly every year and varies by the filing status of the taxpayer. The standard deduction will vary for single taxpayers, for married taxpayers, for taxpayers 65 years of age or older, and so forth. Not every taxpayer can use the standard deduction, and sometimes the standard deduction is better than itemized deductions.

Talk to your tax pro about which deduction you can use… standard or itemized.

If you use itemized deductions it’s important that you get your records together. Itemized deductions go on Schedule A.

There are all kinds of itemized deductions, and the better organized you are, the easier it will be to track your expenses and take your deductions. I like to use the simple envelope system to keep track of my deductible expenses. It is simple, it’s one envelope for each category.

Category #1 is state and local income taxes and sales taxes.
Category #2 is real estate and personal property taxes.
Category #3 is interest on your home mortgage.
Category #4 is any insurance you pay on a home mortgage.
Category #5 is losses from a federally declared disaster such as a hurricane or tornado.
Category #6 gifts to a charity and don’t forget the mileage to drive to the charity.
Category #7 is unreimbursed medical and dental expenses.

Now there are limitations on some of these deductions. For example, medical and dental expenses — and these include mileage for driving to doctors and to pharmacies — must exceed 7.5% of your adjusted gross income. Your tax pro can explain this to you — or you can find the instructions in your tax booklet that the IRS sends you.

The deduction for state and local taxes may also be limited.

If you do your taxes yourself and you use a software program, most of these programs do a very good job of reminding you what is deductible and how you can enter these expenses. A tax professional will also guide you.

In 2021 many of us worked from home, so you may want to claim home office deductions, as well as expenses for office supplies that you bought and used at home. Remember there are job search expenses even if you didn’t find another job.

I urge you to read the instructions that the IRS sends you, pay attention to the questions that your income tax computer software asks you, and pay attention to what your tax professional says to you.

Small deductions can add up to significant money.

And remember, if you have a tax problem or issue, call now for a free consultation. And get those envelopes ready and start sorting out your tax-deductible expenses. It might be a good idea now to start the envelope system for 2022 expenses.

Wrote by Alan Mendelson. Follow us for more of my tax tips.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

This is not only tax season — but it’s also retirement account season. Between now and tax deadline day you are going to hear a lot about making contributions to your retirement accounts. Banks, stockbrokers, gold and silver dealers, even cryptocurrency companies are going to be advertising for your retirement money.

I tell you all the time to talk to a professional before you make decisions about your taxes — and when it comes to putting money into retirement accounts you really need to talk to professionals.

Let me repeat that because it’s very important — talk to professionals about your options for retirement accounts. You need to talk to them because there are all sorts of issues you must consider.

Some retirement fund contributions give you tax deductions now — and some don’t.

Some retirement funds grow tax-deferred.

Some retirement funds have limits based on your income.

If you’re getting near retirement age you may be allowed to contribute more than someone who is younger.

There are so many things to consider.

Some retirement funds let you withdraw your money without penalties, some have penalties until you reach retirement age.

But let’s consider the big question. Should you even put money into a retirement plan?  The answer is basically yes — but there may be some exceptions.

For example, if you have big credit card bills and you’re paying very high-interest rates it might be better off for you to skip a retirement contribution this year and instead pay down your debt.

And if you’re saving to buy a home — keeping the money aside for your downpayment might be the right thing to do.

This is why you need to talk to a professional. And talk to your significant other or your closest family members. This is not a simple decision to make.

And I’m going to make another suggestion. Don’t talk to just one professional. Talk to several, because when you talk to a professional at a bank and you talk to a professional at a gold dealer, and when you talk to a professional at a stock brokerage, you’re going to get different opinions.

Frankly, when it comes to retirement plans, when you talk to three different professionals you’re going to get at least four different opinions.

Remember, Legal Tax Defense will give you a free consultation if you have tax issues. Call now for immediate help.

I’m Alan Mendelson. follow us for more tax tips.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

An important tax tip for 2022 is to get your taxes done early because you don’t want to be caught with a last minute surprise about owing money to the IRS. This next tax tip for 2022 might sound obvious but it needs repeating: choose your tax return preparer carefully.

Every year there are Ghost preparers who rip off taxpayers. A ghost preparer is a paid tax preparer who doesn’t sign returns and tried to hide their identity from the IRS.

By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund.

Unscrupulous tax return preparers may also:

• Require payment in cash only and not provide a receipt.
• Invent income to qualify their clients for tax credits.
• Claim fake deductions to boost the size of the refund.
• Direct refunds into their bank account, not the taxpayer’s account.

Choose a tax return preparer wisely.

Taxpayers should verify both their routing and bank account number on the completed tax return for any direct deposit refund. And taxpayers should watch out for preparers putting their bank account information onto the returns.

Remember Legal Tax Defense will give you a free consultation. It really is a free consultation about your tax issues. In many cases, they can tell you how to fix your tax problems yourself without paying them a cent.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

Do you need to make an estimated income tax payment? If you do need to make an estimated payment for the fourth quarter of 2021 the deadline to make the payment is on January 18th.

If you don’t have sufficient payments made to the IRS during the year you could be hit with a penalty.

Most of us make our payments during the year through our payroll deductions. But if you had outside income — for example you sold stock or cryptocurrency for a big profit — you may need to make an additional payment.

Remember the tax system is a pay-as-you-go system. If you don’t pay in enough you can be penalized. And remember January 18th is the deadline to catch up on those underpayments.

This year, as many as 25 million Americans could be in for a surprise — they could owe serious money to the IRS because they collected unemployment insurance benefits during the pandemic.

Unemployment insurance benefits are taxable. If you had withholding — well good for you. You might not owe the IRS anything. But many recipients of unemployment benefits during the pandemic did not have withholding because they lost their jobs and they needed all of that unemployment money that came each week.

Well now it’s time to pay the piper — yes, it’s time to pay the IRS.

And guess what — there is no forgiveness of the unemployment benefits in 2021. In 2020 Congress pushed through legislation so you didn’t have to pay taxes on about ten thousand dollars of your unemployment money. But there is no such deal for the unemployment money paid in 2021.

You might owe the IRS a good chunk of cash this year.

Remember, it’s always best to consult with a tax professional. And call my friends at Legal Tax Defense for a free consultation.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

This tax tip might save you some money and some aggravation. Just about every year, most taxpayers get a refund from the IRS. Usually, about 66% to 75% of taxpayers get money back when they file their tax returns. Many taxpayers bank on that refund. Some consider it to be forced savings. Some use that refund as a rainy day fund. Some look at that refund as money to splurge with.

But this year — the refunds for 2021 might be smaller — and for some taxpayers, there may be no refunds at all. And some taxpayers might have to pay money instead of getting a refund.

And the reason that things might be different is that many Americans received advances on their child tax credits. In some cases, families got tax credits that were too much. And that could mean you owe money on your 2021 returns.  Look out for a special letter from the IRS with form 6419. Form 6419 will help you reconcile what you received for Child Tax Credits — and what you’re actually entitled to. Don’t put off reading form 6419. It’s better to tackle any surprises earlier than later.

Some taxpayers received pandemic unemployment assistance. They could raise your tax bill too. PPP forgiveness could mean additional forms you have to file this year.

So here’s the bottom line for your money — get to work on your 2021 taxes earlier than in other years. You don’t want to be surprised at the last minute.  And remember, consult with a tax professional if you have a problem or if you have any questions. You might need a tax attorney. You might need a tax defense attorney. You might have to seek tax debt relief. You might even need to seek an offer in compromise and a tax expert can help and advise you on how to lower your tax debt.

Remember, Legal Tax Defense offers a free consultation. Just give us a call today.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

Here’s some good news. That surge in gasoline pump prices over the past year has prompted the IRS to increase some of the mileage deduction rates in 2022.

Beginning January 1, 2022, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) are:

58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021.

18 cents per mile driven for medical, or moving purposes for qualified active-duty members of the Armed Forces, up 2 cents from the rate for 2021.

14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2021.

These possible deductions should not be overlooked and they can add up to big bucks.

Let’s take the business mileage deduction of 58 and a half cents per mile. Just a ten-mile trip — five miles in each direction — is $5.85 and what business destination is only five miles away?

The business mileage deduction does not apply to your basic commute from your home to your job. But if you work two jobs — and many freelancers and independent contractors do — the business mileage deduction applies to driving from one job to another. It also applies to your job search and driving to interviews. And you can add parking fees and tolls to your mileage costs.

The IRS wants you to keep accurate records so keep a notebook in your car. Each time you make a deductible trip write down the date, your starting odometer reading, the ending reading, and the total miles driven. Note the purpose of the trip. Has an envelope taped to the notebook to hold parking receipts? Be sure the dates are visible.

You can use this same notebook system for medical trips. Medical trips include doctor visits, trips to the pharmacy, even trips to the eyeglasses store to buy a pair or to have an adjustment made on the frames.

When you drive to a Goodwill or Salvation Army donation location, the mileage is deductible. Enter this info in your notebook too.

At the end of the year that can be a very valuable notebook. And that envelope of parking receipts can also be very valuable.

I know people who have driven 300 miles for a second opinion on medical treatments and people who work two jobs every day and for them, 18-cents per mile and 58.5-cents per mile are real money.

Remember, it’s always advisable to consult a tax expert or tax attorney when you are dealing with tax issues or seeking tax debt relief or an offer in compromise. A tax expert or tax defense attorney is best suited to handle disputes because they know the laws and know how to deal with tax authorities.