Tax Quiz: Wild State Tax Laws

by HMA Staff | May 27, 2019 | Tax, Tax planning, Tax Tips

Think taxes are simple and filled with common sense? Think again! Enjoy this fun quiz to see how well you know the crazy world of state taxes.

If you have a hankering for an apple or banana at work, you’ll pay an extra tax to buy fruit from a vending machine in which state?

1. Georgia
   B. South Dakota
   C. California
   D. Oregon

1. California. Cold food is tax-exempt if purchased at a store, but subject to tax on 33% of the price if you purchase fruit from a vending machine. If you sell fruit in this state…good luck keeping track of the tax.

Looking to finally get that “mom” tattoo on your arm? Which of these states charges a 6% tax on that tattoo?

1. Minnesota
   B. Arkansas
   C. Delaware
   D. Texas

1. Arkansas. Body piercings are also taxed at 6%. So if you are waffling between getting that tattoo or a nose ring, you can eliminate taxes as a deciding factor!

Have you ever looked at a tree in your yard and thought, “wow, that tree sure is exceptional”? If you have one of these “exceptional” trees on your property you might be entitled to a $3,000 tax deduction in which state?

1. Hawaii
   B. Missouri
   C. Maine
   D. Alaska

1. Hawaii. Worried about how new developments were destroying the environment in the 70’s, the Hawaii State Legislature added the tax deduction for expenditures paid to maintain an exceptional tree.

Next time you are at a bakery in this state and the baker lifts the knife to cut your bagel, stop them. It could be a taxable event! Can you name the state?

1. Utah
   B. Wisconsin
   C. Pennsylvania
   D. New York

1. New York. Slicing a bagel meets the state’s definition of prepared food and is subject to an 8 percent sales tax. That goes for applying cream cheese as well.

Looking for a long-term retirement tax-savings tip? Which state exempts you from state taxes once you turn 100?

1. Michigan
   B. New Mexico
   C. Rhode Island
   D. Virginia

1. New Mexico. If you are 100 or older and are not claimed as dependent, you are exempt from filing and paying New Mexico personal income tax.

As you enjoy the nice spring weather, spread some of this fun tax knowledge with family and friends.

Tips for a Faster Refund

by HMA Staff | Feb 25, 2019 | Tax, Tax planning, Tax Tips

As the tax filing season approaches, there are steps you can take now to speed up the filing process. The faster your return is filed, the faster you get your refund. Even if you end up owing money to the IRS, knowing the amount due sooner gives you more time to come up with the funds needed to pay your tax bill. Here are things you can do now to get organized:

1. Look for your tax forms. Forms W-2, 1099, and 1098 will start hitting your mailbox. Look for them and get them organized. Create a checklist of the forms to make sure you aren’t missing any.
2. Don’t wait for Form 1095s. Once again, proof of health insurance coverage forms are delayed. The deadline for companies to distribute most Form 1095s to employees is pushed back to March 4. The IRS is OK with filing your return prior to receiving the proof of insurance form as long as you can provide other forms of proof. Remember, 2018 is the last year of penalties if you do not have adequate insurance coverage.
3. Finalize name changes. If you were recently married or had a name change, file your taxes using the correct name. File your name change with the Social Security Administration as soon as possible, but be aware of the timing with a potential name conflict with the IRS.
4. Collect your statements and sort them. Using last year’s tax return, gather and sort your necessary tax records. Sort your tax records to match the items on your tax return. Here is a list of the more common tax records:
   • Informational tax forms (W-2, 1099, 1098, 1095-A, plus others) that disclose wages, interest income, dividends and capital gain/loss activity
   • Other forms that disclose possible income (jury duty, unemployment, IRA distributions and similar items)
   • Business K-1 forms
   • Social Security statements
   • Mortgage interest statements
   • Tuition paid statements
   • Property tax statements
   • Mileage log(s) for business, moving, medical and charitable driving
   • Medical, dental and vision expenses
   • Business expenses
   • Records of any asset purchases and sales
   • Health insurance records (including Medicare and Medicaid)
   • Charitable receipts and documentation
   • Bank and investment statements
   • Credit card statements
   • Records of any out of state purchases that may require use tax
   • Records of any estimated tax payments
   • Home sales (or refinance) records
   • Educational expenses (including student loan interest expense)
   • Casualty and theft loss documentation (federally declared disasters only)
   • Moving expenses (military only)

If you are not sure whether something is important for tax purposes, retain the documentation. It is better to save unnecessary documentation than to later wish you had the document to support your deduction.

1. Clean up your auto log. You should have the necessary logs to support your qualified business miles, moving miles, medical miles and charitable miles driven by you. Gather the logs and make a quick review to ensure they are up to date and totaled.
2. Coordinate your deductions. If you and someone else may share a dependent, confirm you are both on the same page as to who will claim the dependent. This is true for single taxpayers, divorced taxpayers, taxpayers with elderly parents/grandparents, and parents with older children.

While you are organizing your records, ride the momentum to start your filing system for the new year. Doing so will make this process a breeze this time next year!

Early Warning Signs of a Tax Problem

by HMA Staff | Jan 21, 2019 | Tax, Tax planning, Tax Tips

There are many factors that can cause an unfavorable tax swing leaving you with a surprising tax bill in the spring. Here are six warning signs that you might have some unexpected taxes waiting for you.

1. You didn’t update your W-4
   You may have noticed a change in your tax withholdings earlier this year. These changes are based on withholding tables rolled out by the IRS to employers in early February. Now, according to the U.S. Government Accountability Office (GAO), as many as 30 million taxpayers may not have adequate withholdings for 2018. If you have not already done so, review your withholdings in light of the new tax laws.
2. You withdraw funds from an IRA before you’re 59½
   Situations arise where you need to dip into your retirement savings to address an immediate need. When this happens, it might have major tax implications. This includes:
   • The withdrawal may be subject to a 10 percent early withdrawal penalty.
   • The funds withdrawn will be taxed at your highest (marginal) tax rate.
   • The additional income may push you to a higher tax bracket or bump you over tax-benefit phaseout thresholds.
3. You receive a large raise early in the year
   While the raise means more income for you, it also means more taxes due to the IRS. Depending on how much more income, it might be taxed at a higher rate than your income in previous years. The tax brackets are built-in to the IRS withholding tables, but they don’t take your entire situation into account.
4. You have a second job
   Making some money on the side is a great thing, but can be a major tax problem if you don’t plan properly. In addition to being taxed as ordinary income, it might be subject to self-employment tax of 15.3 percent! Plus, withholding rules start over for each job and do not account for any other income you receive.
5. Your child turns 17
   One of the biggest tax benefits that come by having dependent children is the Child Tax Credit. In the year your child turns 17, they are no longer eligible for this potential $2,000 credit. What’s more, personal exemptions are suspended for the next few years. So you may not only lose an exemption for this child, you now will not receive a Child Tax Credit.
6. Your standard or itemized deduction is lower
   While the standard deduction is nearly double to $12,000 ($24,000 for married filing jointly) for 2018, personal exemptions are suspended. In addition, many itemized deductions are either limited or eliminated! This can create a vastly different amount of taxable income versus last year. While tax rates are generally lower, there will be more than one surprised taxpayer that sees an expected tax refund turn into a tax bill.

So what can you do? If any of these situations apply to you, now is the time forecast your income and deductions for the year and estimate your tax liability. If your withholdings are falling short, there is still a little time to update your paycheck allowances for a pay period or two or make an estimated tax payment.