This past Tuesday evening at the Home Start office in Mid City San Diego was a busy night. I prepared six returns in four and a half hours. I am getting better with my spanish every week, and I was pleased that my site coordinator wanted to discuss with me the option to be a possible site coodinator next year as my returns are quick, accurate, and I communicate well with the clients.

My first client was an older married couple, the husband was retired and recieved Social Security and the wife was a care giver with a W-2 and made roughly $20k last year and also withheld $1900. They were older so they did not have any dependents but they did qualify to recieve the Earned Income Credit. They left with a refund of about $550.

Most of the clients that come to Home Start to get their taxes done qualify for the earned income credit (EITC). Unfortunately, clients that only have an ITIN number do not quality. The tax credit is for certain people who work and have low wages. A tax credit usually means more money in your pocket. It reduces the amount of tax you owe. The EITC may also give you a refund.

To claim the EITC on your tax return, you must meet all of the following rules: 
 - Must have a Social Security Number.
 - Must have earned income from an employer or self imployment.
 - Your filing status cannot be married, filing seperately.
 - You must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return.
 - You cannot be a qualifying child of another person.
 - If you do not have a qualifying child, you must:
            - Be age 25 but under 65 at the end of the year
            - Live in the United States for more than half the year, and
            - Not qualify as a dependent of another person
            - Cannot file Form 2555 or 2555-EZ (Related to foreign earn income)
            - Must meet the AGI income requirements:              

                $43,998 ($49,078 married filing jointly) with three or more qualifying children

                $40,964 ($46,044 married filing jointly) with two qualifying children

                $36,052 ($41,132 married filing jointly) with one qualifying child

                $13,660 ($18,740 married filing jointly) with no qualifying children

 The maximum tax credit you can earn is the following:

                $5,751 with three or more qualifying children

                $5,112 with two qualifying children

                $3,094 with one qualifying child

                $464 with no qualifying children

The last client I had for the evening was a single woman who was able to claim Head of Household status because she provide more than half the support of her son that was living with her. She worked as a house keeper and recieved a W2. Last year she was able to write off 3 dependents, her son of 25 that was going to school, her nephew that was living with her for more than half the year, and her 15 year old son. She recieved a refund last year of about $7700, unfortunately her refund was much less this year. This year, her 26 year old son started working and he claimed himself and was preparing his own taxes. Her nephew went back to live with his mother in Mexico last year, and included in 2010 taxes was the $400 making work Pay Credit in 2010 which is not available this year. In 2010 she claimed 4, this year she was only able to claim 2, she still was able to get a hefty EIC and left with a $5700 refund.

Overall I love helping people and even though I am working for free I enjoy

 

Tuesday evening was my first day volunteering for VITA. VITA, is the IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) Programs that offer free tax help for taxpayers who qualify. You generally have to make $50,000 or less for this service.
My first client was a family of 5, the couple were not US citzens and provided me with ITIN's, their children were US citizens with SSN's. They spoke little english, and I had to have an interpreter with me. It was a simple W-2 with dependents. The couple was not married last year, as the husband filed Head of Household last year when he did their taxes. The husband worked at a restaurant with low income of $25,000 and the wife was a homemaker. I was pleased to see that he at least claimed 0 or 1 for federal withholding on his taxes. With 3 dependents he qualified for EIC and he had a refund of about $4000.
My second client was a woman who needed help filing out the tax survey we give to every client. She wasn't sure what her filing status was, as she filed for divorce this past year. She moved out of the house in April of 2011 and has two children that lived with her all year. She was from another country, and is a US Citizen now and has never filed taxes before as her husband always took care of the financial responsibilites. She worked for herself as a private tennis instructor and made $5000 in 2011. With vehicle expenses and her 2 children as dependents she qualified for Head of Household since she supplied more than half the income for her family. ** I don't know how since she stated that her rent is $500 a month and there is no way she was able to afford it without help and running her business with the expenses that she had. Obviously something wasn't right but we did the tax preparation anyway. Her ex husband had filed her as a homemaker the year before and told me that she wasn't that she has been an instructor for a while now. While looking at the taxes from the previous year I couldn't help but see some shady capital losses. Its none of my business, this isn't my life, but all I could tell her is that she can redo the taxes if she wanted to. She ended up with a $300 return. I really hope things work out for her as she is so uneducated of our tax system here.
Overall, it was a great experience and it is nice to be helping people this year and doing some volunteer work. Volunteering is important to me, its one of my new years resolutions  and also allows me to give back to my community.

Health saving accounts (HSA's) are tax deductible saving plans that allow the tax payer to save pre-tax dollars for the future healthcare expenses. If you spend high amounts for a HMO or PPO and are pretty healthy, I highly recommend getting an HSA. Some employers even contribute free money into your account if you open one. Why spend high amounts on premiums for only visits to the doctor once a year for check ups?? 
My HSA plan allows me 1 free visit for my yearly physical and 1 free visit for my OBGYN pap smear appt. No Co-Pays, and 100% paid for. Contributions to an HSA are tax deductible. Interest & Dividends in a HSA are tax exempt at federal level as well. 
Withdrawals from HSAs are tax free as long as the funds are used for qualified medical expenses. Contribution limits to HSA maxes out at $3100 for individuals and $6250 for family coverage (2012) and $1000 additional catch up contributions for 55+ and older.
In order to be enrolled in an HSA you cannot be covered by HMO & PPO and if HSA isn't an option with your employer or if you are self employed you can enroll into an HSA yourself. You may want to go to www.ehealthinsurance.com to enroll. 

We live in an information age, you no longer have to lease a space to do business... in fact, it saves a lot of businesses money, it helps with the environment (no commuting). I have worked out of my home office for 6 years now and thought I would share with you all valuable information if you work from home or have an online business.

First, figure out the square footage of your home:What is a Square Foot? A "square foot" is a unit of area measurement equal to a square measuring one foot on each side. To measure get a measuring tape and measure the length of the room and the width of the room (L x W = Square Footage). You can also go to: http://www.squarefootage.org/square-footage-calculator.php to plug in your results for a more accurate reading. It is also very important to know the square footage of your entire home. You then simply divide your square footage of your office from the square footage of your entire home. To get the percentage of what you can deduct as home office expenses.

IMPORTANT NOTE: It is very important that you use your work space only for work space! Think of working in a cubicle, if you wouldn't have it in your cubicle at work you shouldn't have it in your own office. (Pool Table, Wii, Baby Crib, Winter Clothes in Closet, Ect...) You will want to make sure it is an area in your home strictly for business use. 

Once you know the percentage of office space that is occupying your home you can deduct that percentage of all interior home expenses. 

For Example:
Rent or Mortgage
Property Taxes
Utilities
Renter's or Home Owner's Insurance
House Cleaning Services
Maintenance Costs Telephone (Must be separate from personal use)
Office Machines: Computers, Printers, Copiers, Calculators (Used Only For Business)
Office Furniture: Desk, Chair, Filing Cabinet, Lamps
Office Supplies: Pens, Paper, File Folders, Printer Ink, Glue, Tape, Calendars, Bulletin Boards, White Boards

What about new businesses that spent money on start up costs but didn't make any profit? Well, if you have another job you can write off these expenses in Schedule C and it will be deducted from your current income. If you don't have another job, then you can carry over this expense up to 30 years. 

I hope all this information was helpful and if you have any tax questions please feel free to comment below.

Here is a New Year's Resolution for you, before you start frantically going through your 2011 receipts and invoices, trying to run some numbers that you can hand off to your tax preparer so they can finish your tax return on time for the April 17th deadline this year. Why not start a New Years Resolution, and become a bit more organized before 2013 comes around the corner?

I recommend going to Mint.Com and create a free account. Put in all your accounts that you own, banking, savings, 401k, credit cards, investments, and create a tag for transactions "TAXES". Once you have tagged all your business, advertising, medical, and anything related to your taxes you can then search for those transactions with your tag and export them to excel. Lost a receipt? Forgot about a transaction? The program will help keep you organized, for transactions that can't be captured with the program, make sure you start 2 folders or a shoeboxes and label it "Personal Taxes" and "Business Taxes". You will need some sort of storage device to keep your tax documents and business expenses in order.

Hire me as your tax preparer and I will create a list of suggested categories of basic tax write offs and get you organized for 2012 based on your business and tax situation. I would recommend creating a document in Google Docs to keep track of the itemizations. Start planning this year as if the end of the year is already here.


As a tax preparer, you can write off my service in your taxes, I make note of exactly how much I get paid, I report everything to the IRS, as I wouldn't want to be out of compliance to never be able to do taxes again. I file my taxes early to get out of the way but thats because I am also very organized. I hope I passed off any information that may be helpful to you when preparing for your taxes and if you have any tax or organization tax questions please feel free to write your comments below.