Tax season is starting to wind down. With just a few more weeks left to get you taxes prepared by the April 15^th deadline, you may be wondering if you will have time to get the done. Fortunately, the IRS is lenient enough to let you file later. But you have to let them know that you will be filing later in the year. Today your accountant in Billings, Montana tells you what you need to know about filing an extension on your taxes.

 

 

 

Your Liability Doesn’t Get a Break

By filing an extension on your taxes, you are able to put off the actual filing until October 15^th. However, that does not mean that any taxes that you owe get to be put off until October 15^th.

If you believe that you will owe on your taxes, you need to estimate the amount that you will owe and send that payment by the April 15^th deadline. But there are some caveats to this.

Pay Too Little – If the IRS thinks that you are paying too little, for instance if you try to send $25, they may deny your request for extension.

Don’t Pay Enough – If you don’t pay at least 90% of what you end up owing, you will have to pay interest on the remaining amount. For instance, you pay $1,000 but it turns out you owe $2,000, then you owe .5% interest on the extra $1,000 every month until you file (in this case about $5 per month).

How to File Your Tax Extension

If you know that you won’t be able to have an accountant in Billings, Montana help you file your taxes before the April 15^th deadline, you can file for a tax extension on your own. Then at any point before October 15^th you can enlist our the help  to finish things up. There are two ways to file that extension.

E-File with the IRS

The IRS provides some software if you meet the income limits. They allow you to file all of your taxes online yourself through their partner site E-File.com (not to be confused with the for-profit website efile.com).

On that site you can begin your tax return, and then select “file an extension” to automatically file your tax extension.

Paper File with the IRS

Some people prefer to simply fill out a paper form rather than create yet another online account. To do so you just have to print off the e-file application by following the link.

It’s as easy as filling in the boxes and then mailing it in.

Pay Your Tax Bill

Even if you have no idea what your tax liability will be, you need to pay something. If you made $100,000 last year, and you didn’t pay any estimated taxes throughout the year, you can expect your liability will be around $25,000. Try to get as close to that as possible.

Because there are some complications that arise, it is probably best to get your taxes started with your accountant in Billings, Montana. Have him file the tax extension. And then work with him in a couple of months to get everything finalized.

Your Accountant in Billings, Montana Can Help!

If you are struggling to get everything together for your taxes, don’t worry! Make an appointment  to get your taxes done, and you will get top of the line service that helps walk you through the steps to filing your tax extension and paying at least some of your liability so you don’t get hit with late payment penalties. Set up your appointment today by calling 406-894-2050 today.

We are in the middle of tax season. If you have already done your taxes, and you’re sitting on a nice tax refund check, then congrats! If you have yet to do your taxes, call us today to set up your appointment with an accountant in Billings, Montana.

Most people will get a refund. Many people will blow that refund on something frivolous. Before you head out the door and start buying rounds at your favorite watering hole, take some time to realize that this is not free money. It is money that you have earned throughout the year. Also take some time to read these tips that will help you be wealthier in 2015 than you were in prior years.

 

Tax Refund Tip 1: Pay Down Debt

I have yet to talk with someone that loves being in debt. Many people appreciate being able to take out a loan to buy those things that they can’t afford to pay for with cash, but most people hate debt and want to be out of debt as soon as possible.

Your tax refund will help you pay down your debt saving you a lot of money in interest charges over the next 5, 10, or 30 years. Every dollar you pay down now, is a dollar that is not accumulating interest charges.

Tax Refund Tip 2: Invest in Your Future

There has been a lot of talk recently about the future of Social Security. While it would be nearly impossible to absolutely wipe out the program, the reality is that it likely won’t be paying out quite as much in the future as it does now. But keep in mind that the program was never intended to pay for your entire retirement anyway.

You need some outside investments to help boost your retirement income and allow you to live the lifestyle you want. Investing at least part of your tax refund will help to get you there.

Tax Refund Tip 3: Give to Charity

Millions of people right here in the US are not as well off as you are. That means they could use a helping hand. You don’t have to give your entire tax refund away, but a small portion will help to go a long way. Before you give a charity your money, be sure to check them on Charity Navigator to make sure the money goes to the program and not to the CEO’s paycheck.

Tax Refund Tip 4: Save Your Money

This is different than investing. We all know the importance of having an emergency fund, yet the majority of people don’t have one. Why? Because they feel they need it all at once or nothing at all. Well with your tax refund you can fund your emergency fund all at once. Just remember that when money goes into the emergency fund it only comes out for emergencies.

Tax Refund Tip 5: Spend it on Yourself

You may be thinking, “Didn’t you just say not to spend your tax refund?” Yes, I said not to spend all of it frivolously. After you have paid down some debt, invested in your future, donated to charity, and boosted your emergency fund, there will be something left over. Even if it’s only $50 or $100, go buy yourself something nice, take your loved ones out to dinner, or buy 100 burgers off the McDonald’s Value Menu if that’s what makes you happy. You earned the money, so spend it on something that makes you happy.

Getting your taxes done by an accountant in Billings, Montana like Mike will let you get that refund back in your pocket quickly. Call 406-894-2050 to set up your appointment today!

Most people think that they will never become disabled. However, statistics show that one out of every four twenty year olds will become disabled before they retire. That means 25% of people will have a sickness or injury that is so severe that they won’t be able to work. Social Security may provide some disability benefits, but most people will have to rely on a personal or work provided disability policy in order to make ends meet. Your accountant in Billings, Montana can help you determine if those benefits are taxable.

 

 

 

What Type of Disability Insurance do You Have?

Not all disability insurance policies are created equal. Therefore, they are not all taxed the same either. There are three basic types of disability policies out there.

Social Security – The same program that will (hopefully) help provide retirement benefits also provides benefits to those who become disabled before they retire. The application process is cumbersome, and proving disability can be a chore.

Employer Benefit – Many jobs have disability insurance as an employer benefit. Part of your paycheck is the fact that if you are disabled, then you can file a disability claim through whomever the employer has purchased their group plan. These policies generally only cover about 60% of wages.

Personal Benefit – A personal disability insurance policy can be added to the employer policy to bring a person up to nearly 100% of pre-disability wages. For example, a person makes $1,000 per month. The employer plan covers $600 of that wage. The individual can buy an additional policy to cover the other $400 (or more than likely it would be about $350 in benefit).

How are Disability Benefits Taxed?

The different disability policies will be taxed differently. It all depends on how the policy is provided.

Social Security benefits may be taxed depending on what your income is. If you are married and filing jointly, your benefits and your spouse’s income can total no more than $32,000 per year. If it goes over that amount, then your benefits, or some of your benefits, are subject to tax.

Employer sponsored benefits are almost always taxed. So if you have a group disability plan, you likely only have 60% of your wages covered. Take away another 20% in taxes, and you are left with less than half of what you were making before disability.

Individual disability benefits are almost never taxed. This is why it is important to bulk up your coverage instead of just relying on employer sponsored benefits. Think of it this way: you paid for your individual policy with money that you already paid tax on. The benefit is therefore not taxed. You received the group policy and did not pay tax on the money used to buy that policy. The benefit is therefore taxed.

Speak with Your Accountant in Billings, Montana

If you are collecting disability benefits, whether from Social Security, a group policy, an individual policy, or a combination of any of those, you should have an accountant in Billings, Montana do your taxes. Disability benefits can become tricky and confusing. Instead of trying to navigate them yourself, leave it up to the professionals.

Here at Practical Taxes we know and understand taxes. We also do everything else that a full service accounting firm does from online payroll services to business consultation to everything in between. Call 406-894-2050 to set up your appointment today!

Currently, because the federal funds interest rate is rather low, annuities are not very popular investment options. They have their time and place, and there are still a lot of people that like to use them. But it is important to know how they will be taxed before you jump right in and start to accumulate money with an annuity. Your accountant in Billings, Montana will certainly help you with these taxes, but this way you can be prepared before you enter his office.

 

 

 

Phases of an Annuity

Before talking about the taxes, we need to understand the different phases of the annuity. Since this is a complex financial product, it has a lot of different working parts. There are essentially two phases to an annuity.

The accumulation phase is when you are still contributing money into the account. This can be done by moving over a few hundred dollars per month, or in larger sums at the end of every year, or even in lump sums. In fact, many people opt for a very short accumulation phase, and they move their entire pension or 401(k) into an annuity when they retire.

The annuitization phase, more commonly called the payout phase, is after you are done putting money into the account, and now you are pulling it out. Based on your age and life expectancy (and a variety of other factors) the annuity company will pay you a set amount every month for the rest of your life (or until the specified period has ended). This is where taxes can be a little tricky.

Taxation of an Annuity

Annuities can be held within an IRA, or they can be considered non-qualified accounts. To make matters simpler, we will assume we are dealing with a non-qualified annuity.

Over your working career, you put money into this annuity. That money will have already been taxed. However, there will be growth in the annuity that is not taxed until you pull the money out. But there is no way to designate which money is going in, and which is coming out, so some special accounting needs to be done.

Let’s suppose that you put in $150,000 into your annuity, and when you annuitize it, the value is $200,000. That means 75% of the money has already been subjected to tax. So when the money comes out of the annuity, only 25% is subject to further taxation.

The concept is pretty simple, but it can get even more complicated when it comes time. Instead of worrying about what will be taxed and what will not be taxed, talk with Mike, an accountant in Billings, Montana. He has the knowledge needed to prepare your taxes no matter where the income comes from.

Practical Taxes is a full service accounting firm in Billings, Montana. We specialize in nationwide online payroll, tax preparation, business consulting and more. If you have an accounting need, we can handle that need!

Recently the government announced that the premiums on FHA loans would be cut by half a percentage point. While that doesn’t seem like a big deal, it can mean the difference of hundreds or thousands of dollars each and every year that you have a loan on your house. To take advantage of this millions of people are refinancing their homes, causing the biggest gains in mortgage applications in six years. If you do decide to refinance, how does that affect your taxes? Are there tax implications, good or bad, for refinancing your home?

 

 

Tax Breaks for a Refinance

The answer is not a straight, “Yes, refinance and collect on all of these great tax benefits!” Instead there are benefits to buying a home or refinancing your home. Here are just a few of the tax implications.

Prepaid Interest – In order to drop your interest even lower, you can prepay some of it. What means is that a large portion of your closing costs go toward this prepaid interest, as a result your monthly payments are lower. The good news is that prepaid interest is deductible from your taxes.

Property Tax – If you are refinancing, then you have already paid your property taxes. If you are buying a new home, you will likely need to pay some of the property taxes. This payment is likely to be wrapped up into your closing costs, or settlement fees. Property taxes can be deducted from your income taxes.

Mortgage Interest – Every year that you pay on your mortgage, you can write off the interest charges. However, if you refinance, you are going to be paying less in interest charges than before. This means that each year you will have less that you can write off, and you may need to start donating money elsewhere in order to keep your deductions above the standard deduction rate.

PMI – If you buy a house and your loan covers more than 80% of the value of the house, you will likely need to pay for private mortgage insurance. This protects the lender in case you default on your loan. The good news is that PMI payments are deductible. The bad news is that it’s an extra $60 – $150 per month that you get no benefit out of. A refinance could help you drop the PMI which saves you money, but also reduces your deductions.

Buying or Refinancing Your Home

Buying a house is likely the biggest financial commitment that you will ever make. The government has made the burden a little easier by offering a variety of tax deductions and breaks for those who are home buyers or refinances. As an accountant in Billings, Montana Practical Taxes knows and understands all of the tax implications of buying or refinancing a home. It may be in your best interest to have him do your taxes this year.

Practical Taxes is a full service accounting firm in Billings, Montana. If you need tax preparation work, nationwide online payroll services, business consulting services, or more, we can handle all of your needs!