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Tax Tips - Financial

Posted by Admin Posted on Mar 04 2020

IRA contribution amounts and due dates

You can contribute up to $6,000 to your Traditional or ROTH IRA for 2019 and 2020. You can contribute an additional $1,000 if you are 50 to 70 for a Traditional IRA or 50 and older for a ROTH IRA. You must contribute by April 15th, 2020 for the 2019 contribution to be counted toward the 2019 tax year and by April 15th, 2021 for the 2020 contribution to be counted toward the 2020 tax year.     

There are income limitations on making these contributions as follows:

Married filing jointly-If your modified adjusted gross income exceeds $193,000 (for 2019) or $196,000 (for 2020) you are not allowed to contribute to a ROTH IRA.

Single or Married filing separately- If your modified adjusted gross income exceeds $122,000 (for 2019) or $124,000 (for 2020) you are not allowed to contribute to a ROTH IRA.

There are additional limitations on allowed contributions and deductibility of the contributions. If you would like to consider making a contribution to your IRA (Traditional or ROTH) contact our office to discuss the possibilities specific to your situation. If you already work directly with a preparer in our firm, please email them directly for assistance. If you do not already have this contact  you can contact the office and schedule a meeting.     

Tax Tips - Individual

Posted by Admin Posted on Mar 04 2020

Things you should be aware of     


  • 2019 Mileage Rate was: 58 Cents per mile     
  • 2020 Mileage Rate will be: 58 Cents per mile     
    • Mileage log required (date, purpose, miles traveled, destination)     
    • You are also required to document your beginning and ending odometer reading for each calendar year.     
    • If you take actual expenses our office will be required to report in the tax software the total auto mileage and total business mileage for each auto.  Please provide both of these numbers when submitting your information.  You are also required to track beginning and ending odometer readings for each auto for each year.     
  • If you own a business, be sure to register with the county to report Personal Property Tax     
  • The Mortgage Interest deduction is limited as stated above.  Our office may request an accounting of how the funds from the mortgage were used and the original mortgage amount.  You must supply this information or our firm will be required to disallow the mortgage interest deduction if we cannot determine the funds were spent on allowed expenses.     

Tax Tips - Business

Posted by Admin Posted on Mar 04 2020

Business deduction documentary evidence – IRS Publication 463     


Many people are under the impression that a credit card statement and/or a bank statement showing purchases made by credit or debit card would qualify as allowed evidence to support the viability of a deduction. However, this is not the case. You would be required to show the receipt for each item deducted on your tax return if your return is selected for audit.      


Under the tax law change of 2018, entertainment expenses are no longer deductible. Business meals and travel are still allowed if you have adequate documentation. In order to deduct travel and meal expenses you need to document the following items:     


  1. Name and location of the hotel or restaurant.     
  2. Dates of stay at hotel or meal at restaurant and amount paid for meals separated from lodging.      
  3. Number of people served at restaurant.      
  4. Business purposes described for the meal and/or travel.


Substantiation for business auto deductions – IRS Publication 463     


Taxpayers have two options for deducting automobile expenses. You can deduct either the actual costs of operating your vehicle or you can take the standard mileage deduction. If you choose the standard mileage deduction method in year one, you must continue using that method throughout the life of that vehicle. Regardless of the deduction method you choose to employ, you are required to maintain a mileage log for each year of claimed business usage. If you elect to deduct the actual costs of the vehicle usage, you would also be required to produce receipts showing proof of deducted costs for fuel, insurance, tires, repairs, etc.  The following items are required to be included in your mileage log:     


  1. The beginning odometer reading for the year (or the first date the vehicle is used for business purposes).     
  2. The date of the travel (you must document all miles driven if using the actual expense method but you are only required to document the business miles driven if using the standard mileage rate method).     
  3. The destination of your travel.     
  4. The number of miles driven to arrive at your destination.     
  5. The business purpose of your travel for any miles you are claiming as a deduction.     


Your mileage log can be a calendar, a notebook, or some other type of log book (office supply stores carry them).     


If your return is ever selected for audit, the IRS and the Department of Revenue would require that you provide your auto mileage log records to substantiate the auto deduction that is taken on your return. Without the log, all auto related expenses will be disallowed.    


Hobby Loss Versus For Profit Business or Farm     



Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the “hobby loss rule”. In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business for profit.     


An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year. If an activity is not for profit, losses from that activity may not be used to offset other income and if so determined, the IRS could change prior years’ returns disallowing prior losses.     


The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:     


  • Does the time and effort put into the activity indicate an intention to make a profit?     
  • Do you depend on income from the activity?     
  • If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?     
  • Have you changed methods of operation to improve profitability?     
  • Do you have the knowledge needed to carry on with the activity as a successful business?     
  • Have you made a profit in similar activities in the past?     
  • Does the activity make a profit in some years?     
  • Do you expect to make a profit in the future from the appreciation of assets used in the activity?  

    New Business Formation Items to Consider

  1. You need to determine what type of taxing entity the business should elect along with the legal entity choice. The available options are sole proprietor (LLC or no LLC) for tax purposes, partnership (as an LLC or no LLC), C Corporation or S Corporation. We recommend you talk with your accountant and attorney to determine the best choice for you.     
  2. Will you have employees? If so, additional requirements will exist.     
  3. If it is a Washington based business it will need to be registered with the State of WA for excise filing purposes (and payroll if you have employees). If an Oregon based business, you will need to register with the Oregon Department of Revenue.      
  4. Most counties in the State of WA and Oregon have a personal property tax that is levied on assets used for business purposes. Is the business registered with the County?     
  5. Some cities require you to have a business license to perform business inside their city limits so you should make sure you are in compliance.     
  6. Do you have a separate bank account set up for business use? You should do this.     
  7. What system do you use for invoicing?       
  8. From a standpoint of bookkeeping software, we generally recommend considering QuickBooks. It is fairly user friendly and will track all activity of the business.     
  9. If you don’t feel confident of you bookkeeping skills, we encourage you to find a local bookkeeper to help with your week to week or month to month needs.     

Existing Business Items to Consider

  • If you are a corporation (either C or S) you are required to have annual business meetings and keep a written record of the minutes of these meetings. At a minimum you should be outlining who the officers are for the year. Any other significant items that are planned for the year from a business standpoint should be documented in the minutes. If you are ever audited, you would be required to produce your corporate minutes.     

  • You are required to file annual renewal of your business registration with the Secretary of State (applies to both Oregon and Washington) if you are registered as an LLC, C Corporation or S Corporation.     

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