CPA Firm in Hoffman Estates

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Schaumburg area CPA firm you can trust. With over 30 years of experience, we operate under on principle: to provide exceptional, personalized client service in a simple to understand method. It is our belief that we offer the best service at the most competitive price in Hoffman Estates We are a full service tax, accounting, and wealth management firm helping small to mid sized businesses and individuals with comprehensive solutions at a fixed monthly cost.

When you run a Chicago, illinois area business, keeping accurate financial records is vital to the continued success and growth of that business. Hiring a professional bookkeeper from Manen Kothari CPA Chicago & Associates who specializes in small business accounting and small business bookkeeping services can help ensure your financial data is always up to date, accurate, and securely stored.

Tax Preparation Portal Hoffman Estates

Our client portal provides the two-way transfer of information. It provides you with convenient online storage in which your files can be easily uploaded, downloaded, stored and shared in a safe and secure environment.  You have quick access to your tax returns, financial statements, payroll returns, Business liability insurance , Business owner insurance, Retirement planning, Foreign bank account reporting , 1120 preparation , 1120s preparation, Property tax appeal, 2017 tax planning, Payroll tax compliance and many other vital documents 24/7 from anywhere with an Internet connection.

We are a full service tax, accounting, and wealth management firm helping small to mid sized businesses and individuals with comprehensive solutions at a fixed monthly cost. At Schaumburgcpa & Associates, we care about each of our clients and are happy to offer free initial consultations, so call us today!

Services include:

  • Income tax return preparation
  • E-filing of returns
  • Tax planning
  • Audit representation
Book-keeping & Payroll Solutions for Small Businesses
  • Book-keeping
  • Payroll
  • Financial Statements
  • Sales & Use Tax

By hiring a qualified CPA from Manen Kothari for your small business bookkeeping needs, you can focus on what really matters – your clients. All of our CPAs are experts in small business accounting and specialize in small business bookkeeping services. From inventory expenses to keeping track of expense accounts, Manen kothari is the name you can trust for thorough, high quality small business bookkeeping services in Schaumburg.

We understand how the latest federal, state and local tax legislation and other developments affect you and are constantly identifying new ways to reduce tax liabilities.

Contact us :-  847-524-0001.

Visit us : schaumburgcpa.info

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Is Canceled Debt Taxable?

Generally, debt that is forgiven or canceled by a lender is considered taxable income by the IRS and must be included as income on your tax return. Examples include a debt for which you are personally liable such as mortgage debt, credit card debt, and in some instances, student loan debt.

When that debt is forgiven, negotiated down (when you pay less than you owe), or canceled you will receive Form 1099-C, Cancellation of Debt, from your financial institution or credit union. Form 1099-C shows the amount of canceled or forgiven debt that was reported to the Schaumburg IRS Audit. If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. Give the office a call if you have any questions regarding joint liability of canceled debt.

Creditors who forgive $600 or more of debt are required to issue this form. If you receive a Form 1099-C and the information is incorrect, contact the lender to make corrections.

If you receive a Form 1099-C, don’t ignore it. You may not have to report that entire amount shown on Form 1099-C as income. The amount, if any, you must report depends on all the facts and circumstances. Generally, however, unless you meet one of the exceptions or exclusions discussed below, you must report any taxable canceled debt reported on Form 1099-C as ordinary income on:

  • Form 1040 or Form 1040NR, if the debt is a non business debt;
  • Schedule C or Schedule C-EZ (Form 1040), if the debt is related to a nonfarm sole proprietorship;
  • Schedule E (Form 1040), if the debt is related to non-farm rental of real property;
  • Form 4835, if the debt is related to a farm rental activity for which you use Form 4835 to report farm rental income based on crops or livestock produced by a tenant; or
  • Schedule F (Form 1040), if the debt is farm debt and you are a farmer.

Exceptions and Exclusions

If you had debt forgiven or canceled last year and receive a Form 1099-C, you might qualify for an exception or exclusion. If your canceled debt meets the requirements for an exception or exclusion, then you don’t need to report your canceled debt on your tax return. Under the federal tax code, there are five exceptions and four exclusions. Here are the five most commonly used:

Note: The Mortgage Debt Relief Act of 2007, which applied to debt forgiven in calendar years 2007 through 2014, allowed taxpayers to exclude income from the discharge of debt on their principal residence. The PATH (Protecting Americans from Tax Hikes) Act extended this relief through the end of 2016.

Up to $2 million of forgiven debt was eligible for this exclusion ($1 million if married filing separately) and debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, also qualified for the relief.

  1. Amounts specifically excluded from income by law such as gifts, bequests, devises or inheritances

In most cases, you do not have income from canceled debt if the debt is canceled as a gift, bequest, devise, or inheritance. For example, if an acquaintance or family member loaned you money (and for whom you signed a promissory note) died and relieved you of the obligation to pay back the loan in his or her will, this exception would apply.

  1. Cancellation of certain qualified student loans

Certain student loans provide that all or part of the debt incurred to attend a qualified educational institution will be canceled if the person who received the loan works for a certain period of time in certain professions for any of a broad class of employers. If your student loan is canceled as the result of this type of provision, the cancellation of this debt is not included in your gross income.

  1. Canceled debt, that if it were paid by a cash basis taxpayer, would be deductible

If you use the cash method of accounting, then you do not realize income from the cancellation of debt if the payment of the debt would have been a deductible expense.

For example, in 2015, you obtain accounting services for your farm using credit. In 2016, due to financial troubles you were not able to pay off your farm debts and your accountant forgives a portion of the amount you owe for her services. If you use the cash method of accounting you do not include the canceled debt as income on your tax return because payment of the debt would have been deductible as a business expense.

  1. Debt canceled in a Title 11 bankruptcy case

Debt canceled in a Title 11 bankruptcy case is not included in your income.

  1. Debt canceled during insolvency

Do not include a canceled debt as income if you were insolvent immediately before the cancellation. In the eyes of the IRS, you would be considered insolvent if the total of all of your liabilities was more than the FMV of all of your assets immediately before the cancellation.

For purposes of determining insolvency, assets include the value of everything you own (including assets that serve as collateral for debt and exempt assets which are beyond the reach of your creditors under the law, such as your interest in a pension plan and the value of your retirement account).

Here’s an example. Let’s say you owe $25,000 in credit card debt, which you are able to negotiate down to $5,000. You have no other debts and your assets are worth $15,000. Your canceled debt is $20,000. Your insolvency amount is $10,000. Because you are insolvent at the time of the cancellation, you are only required to report the $10,000 on your tax return.

If you exclude canceled debt from income under one of the exclusions listed above, you must reduce certain tax attributes (certain credits, losses, basis of assets, etc.), within limits, by the amount excluded. If this is the case, then you must file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the amount qualifying for exclusion and any corresponding reduction of those tax attributes.

Exceptions do not require you to reduce your tax attributes.

Questions?

Don’t hesitate to call if you have any questions about whether you qualify for debt cancellation relief.

Www.SchaumburgCPA.Info is an official blog of Manen Kothari CPA. To ensure compliance with the requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. One should consult their tax advisor before any of the information contained herewith applied to their individual tax situations. SK Tax Associates, Schaumburgcpa.info, or Manen Kothari cannot be held responsible for any general information stated above.

Contact us now: 847.524.0001

For More Information Visit:  http://schaumburgcpa.info/

2016 Tax Provisions for Individuals: A Review

Many of the tax changes affecting individuals and businesses for 2016 were related to the Protecting Americans from Tax Hikes Act of 2015 (PATH) that modified or made permanent numerous taxes breaks (the so-called “tax extenders”). To further complicate matters, some provisions were only extended through 2016 and are set to expire at the end of this year while others were extended through 2019. With that in mind, here’s what individuals and families need to know about tax provisions for 2016.

Personal Exemptions

The personal and dependent exemption for tax year 2016 is $4,050.

Standard Deductions
The standard deduction for married couples filing a joint return in 2016 is $12,600. For singles and married individuals filing separately, it is $6,300, and for heads of household the deduction is $9,300.

The additional standard deduction for blind people and senior citizens in 2016 is $1,250 for married individuals and $1,550 for singles and heads of household.

Income Tax Rates
In 2016 the top tax rate of 39.6 percent affects individuals whose income exceeds $415,051 ($466,951 for married taxpayers filing a joint return). Marginal tax rates for 2016–10, 15, 25, 28, 33 and 35 percent–remain the same as in prior years.

Due to inflation, tax-bracket thresholds increased for every filing status. For example, the taxable-income threshold separating the 15 percent bracket from the 25 percent bracket is $75,300 for a married couple filing a joint return.

Estate and Gift Taxes

 
In 2016 there is an exemption of $5.45 million per individual for estate, gift and generation-skipping taxes, with a top tax rate of 40 percent. The annual exclusion for gifts is $14,000.

Alternative Minimum Tax (AMT)
AMT exemption amounts were made permanent and indexed for inflation retroactive to 2012. In addition, non-refundable personal credits can now be used against the AMT.

For 2016, exemption amounts are $53,900 for single and head of household filers, $83,800 for married people filing jointly and for qualifying widows or widowers, and $41,900 for married people filing separately.

Marriage Penalty Relief
The basic standard deduction for a married couple filing jointly in 2016 is $12,600.

Pease and PEP (Personal Exemption Phaseout)
Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) limitations were made permanent by ATRA (indexed for inflation) and affect taxpayers with income at or above $259,400 for single filers and $311,300 for married filing jointly in tax year 2016.

Flexible Spending Accounts (FSA)
Flexible Spending Accounts (FSAs) are limited to $2,550 per year in 2016 (same as 2015) and apply only to salary reduction contributions under a health FSA. The term “taxable year” as it applies to FSAs refers to the plan year of the cafeteria plan, which is typically the period during which salary reduction elections are made.

Specifically, in the case of a plan providing a grace period (which may be up to two months and 15 days), unused salary reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,550 limit for the subsequent plan year.

Further, employers may allow people to carry over into the next calendar year up to $500 in their accounts, but aren’t required to do so.

Long Term Capital Gains

 
In 2016 taxpayers in the lower tax brackets (10 and 15 percent) pay zero percent on long-term capital gains. For taxpayers in the middle four tax brackets the rate is 15 percent and for taxpayers whose income is at or above $415,050 ($466,950 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent.

Individuals – Tax Credits

Adoption Credit

 
In 2016 a nonrefundable (i.e. only those with a lax liability will benefit) credit of up to $13,460 is available for qualified adoption expenses for each eligible child.

Child and Dependent Care Credit
The child and dependent care tax credit was permanently extended for taxable years starting in 2013. If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses.

For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.

Child Tax Credit
For tax year 2016, the child tax credit is $1,000. A portion of the credit may be refundable, which means that you can claim the amount you are owed, even if you have no tax liability for the year. The credit is phased out for those with higher incomes.

Earned Income Tax Credit (EITC)
For tax year 2016, the maximum earned income tax credit (EITC) for low and moderate income workers and working families increased to $6,269 (up from $6,242 in 2015). The maximum income limit for the EITC increased to $53,505 (up from $53,267 in 2015) for married filing jointly. The credit varies by family size, filing status, and other factors, with the maximum credit going to joint filers with three or more qualifying children.

Individuals – Education Expenses

Coverdell Education Savings Account

 
You can contribute up to $2,000 a year to Coverdell savings accounts in 2016. These accounts can be used to offset the cost of elementary and secondary education, as well as post-secondary education.

American Opportunity Tax Credit
For 2016, the maximum American Opportunity Tax deferral strategies that can be used to offset certain higher education expenses is $2,500 per student, although it is phased out beginning at $160,000 adjusted gross income for joint filers and $80,000 for other filers.

Employer-Provided Educational Assistance

 
In 2016, as an employee, you can exclude up to $5,250 of qualifying post-secondary and graduate education expenses that are reimbursed by your employer.

Lifetime Learning Credit
A credit of up to $2,000 is available for an unlimited number of years for certain costs of post-secondary or graduate courses or courses to acquire or improve your job skills. For 2016, the modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $108,000 for joint filers and $54,000 for singles and heads of household.

Student Loan Interest

 
In 2016 you can deduct up to $2,500 in student-loan interest as long as your modified adjusted gross income is less than $65,000 (single) or $130,000 (married filing jointly). The deduction is phased out at higher income levels. In addition, the deduction is claimed as an adjustment to income so you do not need to itemize your deductions.

Individuals – Retirement

Contribution Limits
For 2016, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $18,000 (same as 2015). For persons age 50 or older in 2016, the limit is $24,000 ($6,000 catch-up contribution). Contribution limits for SIMPLE plans remain at $12,500 (same as 2015) for persons under age 50 and $15,500 for anyone age 50 or older in 2016. The maximum compensation used to determine contributions increased to $265,000.

Saver’s Credit
In 2016, the adjusted gross income limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and-moderate-income workers is $61,500 for married couples filing jointly, $46,125 for heads of household, and $30,750 for married individuals filing separately and for singles.

Manen Kothari, CPA serves in Schaumburg, Mount Prospects, Glendale Heights, Bartlett, Barrington and Chicago as well as other areas of Downers Grove, Naperville, Des Plaines, Elk Grove Village, Skokie and Addison. We are also efficient in showing you the detailed deductions that can help you to limit your tax liabilities for the next few years to come as long as we are at union with your business.

Please call if you need help understanding which deductions and tax credits you are entitled to.

Call now: 847.524.0001

For More Information Visit:  http://schaumburgcpa.info/