People who have owned the same home for many years may not know that the rules regarding taxation of gains and the personal residence exclusion changed in the late 1990s. Prior to that time, there were strict regulations regarding proceeds from the sale of a home. This included having to reinvest the money in the purchase of another, more expensive home within two years.
With changes to the rules implemented in 1997, homeowners now have much greater freedom. What is called “Topic Number 701 – Sale of Your Home” from the IRS says:
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic No. 409 covers general capital gain and loss information.
Under the heading “Qualifying for the Exclusion,” it goes on to explain:
In general, to qualify for the Section 121 exclusion, you must meet both the ownership test and the use test. You’re eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. Generally, you’re not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
Crystal Clarity on Taxation and Your Personal Residence
What does all of this mean to you specifically? As your trusted Fort Collins tax accountant, Shaw & Associates can help you be clear on how any gains you receive from the sale of a personal residence will affect your tax position. Contact us at your convenience.
The arrival of tax season can be stressful. This is especially true if you have put off thinking about taxes since you filed last year’s return. As a trusted tax accountant in Fort Collins, we frequently remind our clients that the best way to reduce your stress and ensure that no important details are overlooked in a last minute scramble to gather information is to plan ahead.
Great Ways to Stay on Top of Your Taxes
Here are four proven tips for saving yourself a great deal of time and effort next year by putting in the work this year:
- Stay organized. It’s easy to let paid invoices, receipts and other paperwork pile up with the idea that you’ll “deal with that later.” But, taking a few minutes to do filing and organizing today can save you headaches down the road.
- Track expenses daily. Not only does recording expenses as they occur keep your records current, it can help you spot cash flow issues that are best addressed promptly.
- Plan your deductions for the year. People often make a number of charitable contributions or tax-deductible purchases just ahead of tax season in an effort to maximize their deductions. A more effective approach is to take a “big picture” look at your finances at regular intervals and make donations or purchases as appropriate.
- Meet with your tax accountant periodically. By connecting with your tax accountant a few times during the year, you will have a better sense of what your tax situation will look like when it comes time to file. That way you can make “course corrections” along the way if needed.
As a leading tax accountant in Fort Collins, Shaw & Associates can provide helpful tax planning guidance all year long. Contact us today!
With the new Tax Cuts and Jobs Act in place, it is important to get the most up-to-date information on filing your tax returns. Taxes and personal finances can be overwhelming, but Shaw & Associates, your trusted Fort Collins tax accountant, wants to make it simple for you. There are a number of changes to the law that may impact your future tax returns.
- Marginal tax rates have decreased. Beginning in 2018, all marginal tax brackets have decreased. Taxpayers will now be required to pay less tax on a higher level of income. This is ultimately a positive adjustment across the board.
- Standard deduction has increased. The standard deduction that a taxpayer is allowed has nearly doubled. In 2018, single filers can deduct $12,000 and a married couple filing jointly can deduct $24,000.
- Personal exemption has been eliminated. Prior to the new tax law, taxpayers could automatically deduct $4,050 per each person on the tax return. From 2018 forward, no personal exemptions can be claimed. For families with a higher number of dependents, this will have a greater impact.
- Several important deductions have been changed or eliminated. In 2018, there are a variety of deductions that have been modified, including the child tax credit, state and local taxes, moving expenses, etc. Contact Shaw & Associates to discuss further how each of these deductions may impact you.
Put Your Mind at Ease
The Tax Cuts and Jobs Act has brought with it many changes, big and small. Avoid overlooking any of these items that may affect your tax situation; your Fort Collins tax accountant can discuss how these new laws will impact you and work through each one with you. Contact Shaw & Associates today to increase your understanding and put your mind at ease!
When it comes to things you look forward to doing, filing your taxes generally does not make the list. We understand! However, putting off filing until the last minute tends not to be a good strategy for most people. In fact, there are a number of reasons why you should work with Shaw & Associates, your Fort Collins tax accountant, to get your forms sent off as early as possible.
Get Ahead of the Game
As any experienced Fort Collins tax accountant will tell you, it’s wise to get your taxes taken care of as soon as you have all the information you need. Here are the top five advantages of being an early bird:
- Avoid identity theft and the filing of fraudulent tax returns on your behalf. If someone gets a hold of your Social Security number, they can file a tax return in your name and have your refund sent to them. For obvious reasons they file early in the season, but they can’t if you’ve already submitted your returns.
- You get your refund faster. If you will be getting money back from the government, the sooner you file, the sooner you’ll have that check in your hand.
- You know what you owe sooner. If you will have to make a payment to the government, knowing what that amount is in January or February gives you more time to gather the funds before the mid-April payment deadline.
- It takes the stress out of tax season. Nobody likes having a deadline hanging over their head. Filing early means you can relax and move on to other things.
- You get information you may need for other reasons. If you will soon be doing things like applying for a mortgage or taking out student loans, you may need verified financial information from your recent tax returns.
The phrase “Good things come to those who wait” applies in many areas of life, but not taxes! Contact Shaw & Associates, your trusted Fort Collins tax accountant, today and let’s get started on your returns!
Tax season is here, and if you’re like most people, you’re not looking forward to preparing your return. Not only is it a labor-intensive project, you are often left wondering if there are ways to save more of your hard-earned income that you didn’t know about. Or worse, you may worry that you’ve made an error that will attract the attention of the IRS. Take it from your trusted Fort Collins accountant, Shaw & Associates: the benefits of having your taxes prepared by a professional greatly outweigh the costs!
4 Reasons to Go with a Pro
If you are considering having your taxes professionally prepared, here are a number of reasons why that’s a smart move:
- It saves time and hassle. Everyone’s financial situation is different, but it’s no stretch to say that preparing your own taxes can take 5-10 hours or more, depending on how complicated they are.
- You may save money. If when preparing your taxes your Fort Collins accountant can find even one or two deductions that you were unaware of, you can retrieve money owed to you that you would otherwise have given away.
- It can prevent errors. Your tax preparer is someone who knows all the ins and outs of the tax code and every last field on every tax form. Consequently, they can ensure that your return is complete and accurate.
- You have someone at your side if you get audited. A tax audit can be a very intimidating process. Having your accountant walk through it with you can be a tremendous relief.
There’s No Reason to Do It Alone
Shaw & Associates, your Fort Collins accountant, can not only provide you with an accurate return this tax season, but also the welcome peace of mind that comes with it. Contact us today to learn more about our services.
You’ve worked hard and your employer rewards you with a holiday bonus. While you greatly appreciate it, it leaves you asking yourself, “What are the tax implications of this gift?” Shaw & Associates, your tax accountant in Fort Collins has the answer!
Here are the questions we are most frequently asked about holiday bonuses:
- Are holiday bonuses taxed? Yes, they are considered a “supplemental wage” and are taxed. Be aware that if a bonus isn’t processed by your employer in the same way that your regular paycheck is (and therefore reported to the IRS), you must report the bonus when you file your taxes.
- Are bonuses taxed at a different rate? No, they are not. The amount withheld from your check is at a rate the IRS requires and may be different than the withholding rate on your regular paychecks. The bonus will be taxed on your tax return at whatever your marginal tax rate is. Shaw & Associates, your tax accountant in Fort Collins, can explain in more detail.
- Is money received in the form of a gift card subject to tax? Yes, you must report the amount of the card when you file your taxes.
- Can I avoid paying taxes on my bonus? Just as with your standard income, your bonus can provide a tax advantage if you do things with it like put it into a retirement account, donate it to a registered charity, make a mortgage prepayment, make “green” home improvements, etc.
- Do employers pay taxes on holiday bonuses? Yes, they pay payroll taxes on the amount given.
It’s important to note that due to the current discussions in Congress around changing the tax laws, it may be to your advantage to delay a bonus until next year when rates are expected to be lower.
Making the Most of Your Much-Deserved Reward
If you’ve got specific questions about what to do with a holiday bonus, your trusted tax accountant in Fort Collins can help. Contact Shaw & Associates today to ensure you’re able to keep as much of that gift as possible.
For many people, Social Security will play an important role in their retirement financial plan. However, with fairly regular tweaks to the program, it’s important to stay current on the latest updates, especially as you begin to approach retirement age. Here are a few things to be aware of from Shaw & Associates, your Fort Collins CPA:
- The age for full retirement benefits increased slightly in 2017. The full retirement age, which had been 66, was bumped to 66 and two months for those born between January 2, 1955, and January 1, 1956, to include people eligible to apply for early retirement this year. The age will increase by two months every year for the next five years, until it reaches 67 years old.
- Retirees receive a small cost of living adjustment. Following two years in which low inflation meant no cost of living adjustment, Social Security beneficiaries are being promised a 0.3 percent increase this year.
- High earners and the self-employed will pay more. These workers will experience a tax hike in 2017 as Social Security raises its maximum taxable earnings level.
- Earnings limits are up for those who work after retirement. People who opt for early retirement but keep working can earn a little more without having their benefits reduced.
Staying Current on Social Security
These are just a few of the recent changes to Social Security. If you have questions about how the program’s benefits will impact your financial future, don’t hesitate to contact Shaw & Associates, your Fort Collins CPA.
Successful businesses are always looking for ways to make their operations more efficient and cost effective. One of the areas where that is easy to do is bookkeeping. As a trusted Fort Collins business accountant, we know that companies sometimes struggle to stay on top of their books. These organizations can benefit in many ways from outsourcing their bookkeeping, including:
- An easy transition. The transition to having an accountant take over the management of your books is quick and painless.
- Frees staff for other projects. With a Fort Collins business accountant handing your accounting, you can have your financial team address other important projects that have been on the back burner.
- A cost-effective alternative to hiring. Sometimes your choice is between hiring more permanent staff to handle your bookkeeping or outsourcing the work. In those cases, outsourcing is often the more budget-friendly option.
- Access to the latest in tools and best practices. It’s an accountant’s top priority to be aware of the latest business processes and to have the most current accounting software. So, by working with them, you tap into those resources.
Put Your Bookkeeping Challenges to Bed!
Are you looking for a Fort Collins business accountant to help with your bookkeeping? Shaw & Associates has the experience and expertise to help you make a seamless transition to stress-free, outsourced accounting. Contact us today to learn more about our services.
Are You Spending Unnecessary Time Managing Your Own Books?
Accurate accounting and bookkeeping are critical to the success of every company — large or small. So, the line item in your budget for the help you need to keep your financials accurate and up-to-date is a critical investment. That said, some companies prefer a DIY approach, and quickly find they are spending too much time managing their business accounting.
You Deserve Outstanding Service and Incredible Value with Fort Collins Business Accounting that Keeps Your Best Interests in Mind
That nagging feeling that perhaps you should be spending less time on your accounting and bookkeeping and/or getting more for your money, may mean you should evaluate your options. Taking the leap to hire a professional to support your business’ bookkeeping on a consistent basis can be daunting, but once you find Fort Collins business accounting that brings you a return on your investment, you will never want to go back.
At Shaw & Associates Fort Collins business accounting, we provide a variety of services with a level of flexibility that many find unique in our industry. For example, we:
- Work closely with business owners and managers to zero in on their precise accounting needs. Then we craft a customized plan to meet those requirements with no “extras” added. What you need is exactly what you get.
- Work to understand your industry. You want to work with an accountant that learns all they can about what you do.
- Focus on the best way for business owners to manage their financials. The accuracy and efficiency of their operations are our top priority. If we can provide ongoing guidance, we’re happy to, but ultimately our goal is to help a company get the assistance it needs at an equitable price.
- Train internal staff to maintain books accurately. With many of our clients, we provide oversight as needed while enabling them to handle most tasks themselves.
- Provide value by giving you the insight you need to maximize deductions and take advantage of financial opportunities that you may be missing.
The result of our consultative approach is that each business we work with gets what it needs from us when it needs it.
As a trusted provider of Fort Collins business accounting, our objective isn’t to maximize the value of your business so you can focus on what you do best. Contact us today.
As far as retirement plans go, the 401(k) plan is among the most common and most popular. If you work for a company of any size, it’s likely you can participate in one. While it’s fairly easy to get signed up and then put the plan on “autopilot” so to speak, take it from your tax accountant in Fort Collins: you’ll get more out of it if you understand how it works.
Key Considerations for your 401(k)
Keep this information in mind as you manage your 401(k) and start putting away money for your retirement:
- You get a tax break for your contributions. The money you put into your 401(k) reduces your current year tax liability. Along with the fact that you are saving for retirement, this makes it a great win-win.
- There are contribution limits. One of the most important numbers associated with your plan is how much you can put into it each year. For most people, striving to hit that limit is a good idea. The number is subject to change, so be sure your information is current.
- There is no upper age limit for contributions. As long as you are employed by a company that has a 401(k) plan, you can continue to make contributions. With some other plans, you have to stop making contributions in the year you turn 70 ½.
- Companies often match your contribution, up to a point. This benefit from your employer is essentially free money! If your company will match a contribution up to, say, six percent of your salary, it’s a good idea to be sure you’re contributing at least six percent so that you get the full match.
- There is a “catch-up” option for older workers. Workers over the age of 50 can contribute more than those 49 and younger. Talk with your tax accountant in Fort Collins about whether you should take advantage of this option.
- Congress made important changes to 401(k) rules in 2006. Most 401(k) plans now have a Roth component that allows individuals to invest some or all their 401(k) contributions into a Roth 401(k). The maximum amount that you can contribute is almost three times that of a Roth IRA and, unlike Roth IRAs, there are no income limitations.
- Self-employed individuals can really super-fund their retirement plans by adopting a 401(k) for their business. Depending on a variety of circumstances, a self-employed individual could contribute up to three times the normal contribution limits compared to someone that is a W-2 employee.
- There are penalties for early withdrawals. In most cases, you will be penalized if you take money out of your plan before reaching age 59 ½. And the penalty is in addition to standard income tax.
- A growing number of companies auto-enroll employees. Check with your HR department to see if that’s the case where you work. Since most people have no reason not to participate in a 401(k) plan, this isn’t really a bad thing!
- Investment options within a 401(k) may be limited. Your employer probably has a set number of plans offering a select group of investments, so you don’t have the freedom you would if you simply went off on your own and made investments. However, most people are happy knowing that financial experts are keeping an eye on the company’s plans and by extension, their plan.
- There may be significant fees for managing your account. Investment companies may charge fees for overseeing your account. Be sure you know what those fees are, as they can add up over time.
The More You Know…
Learn all you can about your 401(k) account so that you can maximize your savings. If you’ve got questions about retirement, Shaw & Associates, your tax accountant in Fort Collins, is happy to help! Contact us today and let’s talk about your strategy.