Reasonable compensation of S Corporation Shareholders

As a reminder, the IRS requires all S Corporation shareholders to take “reasonable compensation”.  After the 2nd year of operations of your S Corporation, if the IRS challenges that reasonable compensation was not paid & reported on quarterly payroll returns and an annual W-2, they will reclassify 100% of shareholder distributions as wages.

Reasonable salary needs to be related to services performed.  If there are other employees working in the S Corporation and business would continue with very little involvement from the owner, an argument could be raised for a lower salary to the shareholder.

What is a deductible medical expense?

If you itemize your deductions for a taxable year on Schedule A (Form 1040 or 1040-SR), Itemized Deductions PDF, you may be able to deduct expenses you paid that year for medical and dental care for yourself, your spouse, and your dependents. You may deduct only the amount of your total medical expenses that exceed 7.5% of your adjusted gross income. You figure the amount you’re allowed to deduct on Schedule A (Form 1040 or 1040-SR).

Tax checklist for newly married couples

Marriage changes a lot of things and taxes are on that list. Newlyweds should know how saying “I do” can affect their tax situation.

Here’s a checklist of items for newly married couples to review:

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Steps to Take Now to Get a Jump on Next Year’s Taxes

Tax planning is for everyone. Get ready today to file your federal income tax return next year. How to making necessary adjustments to withholding, gather records, renew expiring tax identification numbers and more.

Here’s Five Reasons to Use Direct Deposit for a Tax Refund

As taxpayers prepare for the start of filing season, they should consider a direct deposit of any refunds due. It’s easy, safe, fast — and the best way to get a refund. That’s why 80 percent of taxpayers choose it every year. IRS Direct Deposit: Is Fast. The quickest way for taxpayers to get their refund is to electronically file their federal tax return and use direct deposit. They can use IRS Free File to prepare and e-file federal returns for free.  Taxpayers who file a paper return can also use direct deposit. Is Secure. Since refunds go right into a bank account, there’s no risk of having a paper check stolen or lost. This is the same electronic transfer system that deposits nearly 98 percent of all Social Security and Veterans Affairs benefits into millions of accounts. Is Easy.  Choosing direct deposit is easy. With e-file, just follow the instructions in the tax software. For paper returns, the tax form instructions serve as a guide. Make sure to enter the correct bank account and routing number. Has Options. Taxpayers can split a refund into several financial accounts. These include checking, savings, health, education and certain retirement accounts. Use IRS Form 8888, Allocation of Refund (including Savings Bond Purchases), to deposit a refund in up to three accounts. Do not use this form to designate part of a refund to pay tax preparers. Taxpayers should deposit refunds into accounts in their own name, their spouse’s name or both. Avoid making a deposit into accounts owned by others. Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Taxpayers should check with their bank for direct deposit rules. There is a limit of three electronic direct deposit refunds made into a single financial account or pre-paid debit card. The IRS will send a notice and a refund check in the mail to taxpayers who exceed the limit. Additional IRS Resources: Publication 17, Your Federal Income Tax Where’s My Refund? Frequently Asked Questions about Splitting Federal Income Tax Refunds Share this tip on social media — #IRSTaxTip: Here’s Five Reasons to Use Direct Deposit for a Tax Refund.  https://go.usa.gov/xnp8Q

How to Value Non-Cash Contributions

Arthur Godfrey, radio and TV great, said . . . . . “I’m proud to be paying taxes in the United States. The only thing is – I could be just as proud for half the money.” Non-cash contributions is one of the most over looked deductions every year for several reasons. Items get donated without a detailed list so there is no way to value those items. In other instances, detailed lists may be available without a method of valuing the items. The information below should provide information and assistance in making the most of your non-cash contribution deductions.

Deduct it! Deduct it!
This paperback book helps you document and value your non-cash charitable donations. Fair market values are researched within the last quarter of the prior year across the country in used clothing stores, thrift shops, online, and other methods.

Salvation Army:
https://satruck.org/Home/DonationValueGuide

Goodwill:
https://www.goodwill.org/wp-content/uploads/2010/12/Donation_Valuation_Guide.pdf

Purple Heart:
http://www.purpleheartfoundation.org/donate/
You can find specifics regarding valuing your donations on this donate page.

All items donated to the Purple Heart, are deductible for income tax purposes at their present Fair Market Value. Internal Revenue code places the responsibility for the “Fair Market Value” upon the donor rather than the agency receiving the gift. The Internal Revenue advises that “Fair Market Value” is interpreted as that price which a buyer is willing to pay and a seller is willing to accept.

The Top 10 Overlooked Tax Deductions

The top 10 overlooked deductions Each year, thousands pay too much in taxes because they didn’t think of deducting job hunting expenses or donations to charity. Read this list before you file.

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What is IRS e-file

IRS e-file is the fastest most accurate way to file your tax return electronically to the IRS using an Authorized IRS e-file Provider. You don’t have to worry about your return being lost or delayed in the mail. Upon receipt of the return information, the IRS quickly and automatically checks for errors or other missing information (the error rate for electronic returns is less than one percent compared to the error rate for paper returns which remains steady between 20 and 21 percent). Within 48 hours of electronic transmission, IRS acknowledges acceptance of the return. Only IRS e-file options provide this assurance. Read more

Employers – Recordkeeping Requirements for PA Unemployment

• Employers – Recordkeeping Requirements for PA Unemployment

Qualified Medical Expenses

Following is a list of qualified medical expenses that you can report on Form 1040 as a deduction. We don’t claim to include every conceivable deductible medical expense, but it’s a pretty hefty start! The expenses are listed in alphabetical order. For a complete list of qualified medical expenses, see IRS Publication 502, Medical and Dental Expenses. Read more

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