North Bethesda CPA: Certified Public Accountant and Financial Services

Hi! Congrats! Hope the dust has settled and you have started to enjoy it. As for your question, you have nothing to worry about. You are right about the two tests, they are called "Bona Fide Residence" and "Physical Presence" tests. BFR is likely not an option for 2020 (since you moved in the middle of the year) but you certainly will eventually qualify for the physical presence test. While you're waiting here are some of your options: Extensions: 1) Automatic 2 months extension through June 15th 2) Additional 4 months extension via IRS form 4868 3) "Special” extension through December 15th via a letter 4) Another “Special” extension until you meet either the Bona Fide Resident or the Physical Presence Test via IRS form 2350 - this one definitely by far gives you the longest time to be eligible for either the foreign earned income exclusion (FEIE) or the Foreign Tax Credit (FTC) based on meeting one of the tests. Hint: our favorite!:) Cheers! Tia, your CPA

Hi! Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the "three-year law" and leads many people to believe they're safe provided they retain their documents for this period of time. However, if the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit. To be safe, use the following guidelines. Business Records To Keep... Personal Records To Keep... 1 Year 1 Year 3 Years 3 Years 6 Years 6 Years Forever Forever For some special circumstances (both individual and business financial impact) that could be applicable to your specific situation we've created a dedicated area on our website: https://cp7.cpasitesolutions.com/~creative/taxretention.php Please visit it and let us know if you find it helplful. Cheers! Tia, your CPA

Hi! As you know we are small business owners ourselves so we live and breath what you're going through. We found it manageable to organize this topic into these five categories and let you explore the area that is most applicable to your situation: Starting A Business Running Your Business Growing Your Business Securing Business Loans Selling/Exiting Your Business Please visit a fairly comprehensive "Business Strategies" section of our website: https://cp7.cpasitesolutions.com/~creative/business-strategies.php to find some insightful tips and tricks written by some of the best in the industry and organized by the 5 topics referenced above. Remember if there is something you're questioning or unsure about we really are a click away. Cheers! Tia, your CPA

Hi! Good news is that you're not alone. Another good news is that your tax and financial planning does not have to be limited to the last few weeks of the year; there are things you can put in place that will make this aspect of year end much more manageable. It so happens that we are very passionate about this topic. Please visit a fairly comprehensive "Tax Strategies for Business Owners" section of our website: https://cp7.cpasitesolutions.com/~creative/taxstrategies-businessowners.php Topics include: Tax Planning For Small Business Owners 7 Biggest Misconceptions Business Owners Have About Their Returns Travel and Entertainment: Maximizing the Tax Benefits 7 Ways To Save Even More Income Taxes The Home Office Deduction Turn your Vacation Into a Tax Deduction Form of Business Organization: Which Should You Choose? Retirement Plan Options For Small Businesses The "SIMPLE" Plan: A Retirement Plan for the Really Small Business Cheers! Tia, your CPA

We hear you! That is why we subscribe to some of the most up to date compilation that is sure to satisfy any thirst for financial knowledge. We call them "Value Added Web Resources" https://cp7.cpasitesolutions.com/~creative/links.php#stay because there is no other way to describe them. We've even categorized them for you to help you narrow things down to your specific need. Categories include: New Employee Forms Financial Links Government Links Consumer Advice Internet Resource News And Magazines Software Links Education Links Just For Fun Take a look at these categories our dedicated team of pros keep up with at no cost to you. All you have to do is read the ones relevant to your small business, financial, tax needs and then if you find you still have questions or need some clarifications, just reach out to us, we are certainly here to help. You could also just give feedback on the content and tell us if there is anything you'd like to see more of. Cheers! Tia, your CPA

Hi! It so happens that we are very passionate about this topic. Please visit a fairly comprehensive "Tax Strategies for Individuals" section of our website: https://cp7.cpasitesolutions.com/~creative/taxstrategies-individuals.php Topics include: Tax Saving Strategies: A Helpful Checklist Travel and Entertainment: Maximizing the Tax Benefits The "Nanny Tax" Rules: What To Do If You Have Household Employees Higher Education Costs: How To Get The Best Tax Treatment Selling Your Home: How To Minimize the Tax On the Gain The Deductibility of Points Annuities: How They Work and When You Should Use Them Retirement Plan Distributions: When To Take Them Retirement Plan Distributions: How To Take Them Roth IRAs: How They Work and How To Use Them Mutual Fund Taxation: How To Cut The Tax Bite Advanced Charity Techniques: Maximizing Your Deduction Charitable Contributions of Property: Maximizing the Deduction Charitable Contributions: How To Give Wisely Cheers! Tia, your CPA

Hi, CONGRATS! Life is full of changes, and surprises. Use these guides to help you make sound financial decisions. https://cp7.cpasitesolutions.com/~creative/life-events.php Getting Married Becoming a Parent Preparing for College Developing a Financial Plan Dealing with Your Bank Improving Your Credit Choosing A Professional Buying Insurance Getting a Loan Planning For Retirement Buying & Maintaining A Car Buying & Selling A Home Planning Your Estate Making Charitable Contributions Avoiding Scams Getting Divorced or Becoming Widowed Coping with Major Illness Coping with Death of a Loved One Improving Your Retirement Handling Other Situations Cheers! Tia, your CPA

Hi! We have over 500 most common questions and answers stored on our website. Please checkout this link for more details: https://cp7.cpasitesolutions.com/~creative/frequently-asked-questions.php You will see that we have attempted to organize them by topics to help you narrow down your search. Categories include: Business Owners Home Owners Financial Planning Insurance Life Events: Frequently Asked Questions Credit Banking Affluent Individuals Parents Taxes Please don't forget to send us your feedback on the content. We are constantly looking for ways to enhance our delivery. Sure hope that helps. Cheers! Tia, your CPA

Keep records of all your current year income and deductible expenses. These are the records that an auditor will ask for if the IRS selects you for an audit. Here is a sample list that relate to your current year income and deductions: Income (wages, interest/dividends, etc.) Exemptions (cost of support) Medical expenses Taxes Interest Charitable contributions Child care Business expenses Professional and union dues Uniforms and job supplies Education, if it is deductible for income taxes Automobile, if you use your automobile for deductible activities, such as business or charity Travel, if you travel for business and are able to deduct the costs on your tax return While you're storing your current year's income and expense records, be sure to keep your bank account and loan records too, even though you don't report them on your tax return. If the IRS believes you've underreported your taxable income because your lifestyle appears to be more comfortable than your income would allow.

Unfortunately, for tax years 2018 through 2025 interest on home equity loans is only deductible when the loan is used to buy, build or substantially improve the taxpayer's home that secures the loan. Prior to 2018, many homeowners took out home equity loans because unlike other consumer-related interest expenses (e.g., car loans and credit cards) interest on a home equity loan was deductible on your tax return for loans up to $100,000.

Most individuals are in a higher tax bracket in their working years than during retirement. Deferring income until retirement may result in paying taxes on that income at a lower rate. Deferral can also work in the short term if you expect to be in a lower bracket in the following year or if you can take advantage of lower long-term capital gains rates by holding an asset a little longer.

Financial industry uses something called "harvesting your losses" to mitigate some of your impact. If in addition to your gain you also have an investment on which you have an accumulated loss, it may be advantageous to sell it prior to year-end. Capital losses can be used to offset all or part of your capital gain. You may also get an additional $3,000 ($1,500 for married filing separately) capital loss after you've depleted all of your gains. Talk to your financial advisor about this, they will definitely know what to do. Last but not least, if you don't have enough losses to absorb all of your gains and you're planning on selling an investment on which you have an accumulated gain, it may be best to wait until after the end of the year to defer payment of the taxes for another year (subject to estimated tax requirements). Again, a close analysis of your situation is always warranted so please do a thorough research https://www.irs.gov/pub/irs-pdf/p550.pdf or give us a call.

You may be able to save a little on the tax bill by following this strategy: if you're planning to make a charitable gift, it generally makes more sense to give appreciated long-term capital assets to the charity, instead of selling the assets and giving the charity the after-tax proceeds. Donating the assets instead of the cash avoids capital gains tax on the sale, and you can obtain a tax deduction for the full fair-market value of the property.

You may be able to take an immediate Section 179 expense deduction of up to $1,040,000 for 2020 ($1,020,000 in 2019), for equipment purchased for use in your business, instead of writing it off over many years. There is a phaseout limit of $2,590,000 in 2020 ($2,550,000 in 2019). Also, eligible self-employed individuals can deduct 100 % of their health insurance premiums. Consider setting up and contributing as much as possible to a retirement plan. These are allowed even for a sideline or moonlighting business. Several types of plan are available: the Keogh plan, the SEP, and the SIMPLE IRA. You could defer sending invoices or bills to clients or customers until after the new year begins; Defer some of the tax, subject to estimated tax requirements. Achieve the same effect of short-term income deferral by accelerating deductions, for example, paying a state estimated tax installment in December instead of the January due date. Read credible sources carefully (www.irs.gov).

Hi. A wide variety of tax relief is available, but you'll need to choose which credit or deduction to claim or which savings plan to use based on your individual tax situation. You also can't use two different kinds of relief for the same item. For instance, you can't take the higher education credit and tuition fees deduction for the same student for the same year. You also can't take the American Opportunity Tax Credit and the Lifetime Learning Credit for the same student for the same year. There may also be limits based on adjusted gross income. Please browse through our complete 18 part educational tax credit Q&A under the following link within the FAQ tab of our website: https://cp7.cpasitesolutions.com/~creative/frequently-asked-questions.php?item=46&catid=38&cat=Tax%20Benefits%20of%20Higher%20Education:%20Frequently%20Asked%20Questions We've attempted to provide a comprehensive guide but the tax law constantly evolves so please give us a call if you have a quick question.

Expatriate tax filing requirement (simplified): I am afraid you are what is commonly referred to as an “Accidental American”. Unfortunately, as it stands as of the writing of this response you are subject to the same U.S. tax filing and payment obligations as other Americans living abroad who are fully aware of their U.S. tax status and usually identify as “expats”. This means if you meet certain U.S. annual tax filing requirements (generally based on your age, your filing status and your worldwide income threshold) you must file U.S. taxes. Income threshold changes every year but you can generally reference the following IRS chart to determine your filing requirement: https://apps.irs.gov/app/vita/content/globalmedia/who_must_file_charts_a_b_4012.pdf Please do not hesitate to schedule your consultation with us if you need someone to help you navigate your U.S. Tax and or other reporting compliance. (Due to char limit see next post for FBAR and FATCA)

HEAD OF HOUSEHOLD (PART I) DO I QUALIFY? Head of Household (HOH) filing status (simplified): Generally, if you were not married on the last day of the tax year and you paid >50% of the household expenses for a “home” where you and your child* (or another “dependent”) lived you will qualify. BONUS 1: This is true even if your “ex” claims the child as a dependent that year, typically per divorce decree BONUS 2: If you’re using your parent to qualify as a HOH he/she didn’t have to live with you; you did still had to pay >50% of your parent’s living costs BONUS 3: “Home” is often misinterpreted to mean a stand-alone property you mortgaged. Not so. Your “home” can be a rental; you may have even shared a house with other person(s) but the key is that you were legally obligated to pay your portion of the monthly rent that legally entitled you to use a portion of a bigger place as your legal residence. That certainly qualified as your “home” in the HOH sense (char limit; plz see part II)

Senior/Retiree filing requirement (simplified): Generally, if you were married, over 65 and not somebody's dependent*, making >26-27K ($ varies a bit) you must file. You may not owe but must still file. You may even get a refund depending on your withholdings check your SSA-1099) *Generally, being "someone's dependent" means he/she paid >50% of your living expenses for the year e.g. your child(ren). Actual rules are a bit more complicated but this is a "quick start" Helpful resources: 1) https://www.irs.gov/individuals/seniors-retirees Pros: A LOT of good info. Cons: A LOT of good info but may be a bit on a "tech" side; a bit much for some of our retirees 2) https://www.irs.gov/help/ita/are-my-social-security-or-railroad-retirement-tier-i-benefits-taxable; Pros: a quick general assessment tool to help you determine whether your social security benefits are taxable 3) https://www.irs.gov/pub/irs-pdf/f1040s.pdf Pros: Excellent new PAPER tax form; simplified for seniors

Student filing requirement (simplified): Generally, if you were single, under 65 and not somebody's dependent*, making >12K ($ varies a little bit every year) you must file. You may not owe but must still file. You may even get a refund depending on your withholdings (shown on your W-2) *Generally, being "someone's dependent" means you lived in someone else's house (usually your parents) and he/she paid >50% of your living expenses for the year. Actual rules are a bit more complicated but this is a starting point, you're not trying to become a tax pro here, right?:) Helpful resources: 1) www.irs.gov/individuals/students Pros: A LOT of good info. Cons: A LOT of good info but may be a bit on a "tech" side 2) https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return Pros: a quick general assessment tool. Cons: not really a "con" but it requires a bit of a focus and attention to details for accurate assessment 3) https://apps.irs.gov/app/freeFile Pros: Excellent beginner tool.