A CPA Answers a Mixed Bag of Tax Questions

Jonathan Gorski, a certified public accountant, took questions live from Boston.com readers on tax issues. Below is an edited transcript of his chat.

 

Question: How does paying off my mortgage impact my taxes?

Jonathan Gorski: Mortgage interest is an itemized deduction that reduces your taxable income. So it will reduce your deductions and increase your taxable income. Depending on your other deductions, it may also not allow you to itemize your deductions any longer. However, I think that the interest savings generally outweigh the tax savings.

Question: As a self employed individual, I find it difficult to track my mileage down to the exact mile. If I am not certain, what am I supposed to do? Do my records have to be 100 percent accurate?

Gorski: Of course your records have to be 100 percent accurate. In general, try to keep the best log you can—even if it is simply writing down location to location. The IRS may allow you to recreate your miles if you maintained a reasonable travel log but will not do so if you have a blank calendar at the end of the year upon review but yet claimed business miles.

Question: Who should pay quarterly estimated taxes?

Gorski: Individuals are required to make estimated tax payments to the IRS if the amount of tax they pay through withholding on wages and other payments will not adequately cover their tax liability for the year. To avoid interest and penalties on an underpayment of tax, individuals, in the current year, are required to pay in the lower of

a) 90 percent of their current year tax; or

b) 100 percent of the prior year tax. If the taxpayer’s adjusted gross income (AGI) for the prior year was more than $150,000 ($75,000 if the taxpayer’s current year filing status is married filing separately), substitute 110 percent for 100 percent in the prior sentence.

Question: Do you see any major changes to the tax laws coming and how should I prepare for them?

Gorski: I can’t answer this question specifically as it is a long-winded answer but I wanted to answer it generally as there were numerous tax changes for 2013. I would suggest contacting an advisor to discuss your tax situation.

Question: Can my tax preparation fees be entered as deduction if I am not taking standard deduction?

Gorski: If you are filing a schedule C or E then a portion of them that pertained to the completion of those forms can be deducted there—otherwise you do not receive a deduction.

Question: What tax deduction do people miss most often?

Gorski: I think the most missed opportunities that I see pertain to the under-utilization of pre-tax benefits offered by employers. Make sure you take advantgae of pre-tax items such as retirement plans, flexiable spending accounts, pre-tax transportation benefits, etc.

Question: If I had to spend money on weather-related expenses for my business (snow removal) can I deduct those?

Gorski: Yes you can. If you work from home and paid to have your driveway shoveled then that may be an issue but in general you can deduct ordinary and necessary expenses pertaining to your business, which sounds like shoveling would qualify in this instance. One caveat is that you should issue a 1099-MISC to the person or company if you paid them over $600 and they are not incorporated in order to claim the expense. 

Question: I took a Section 179 deduction this year. It amounted to 90 percent of the value of the vehicle. What happens to the other 10 percent basis the next year?

Gorski: The other 10 percent is the personal portion I am guessing. If you took 179 for 100 percent of the vehicle, then the remaining value gets depreciated over 5 years. Generally 179 expense for an automobile is limited so you may want to review your 90 percent figure.

Question: My wife took MTEL tests this year. Although she is not a teacher yet, can these fees be deducted?

Gorski: I don’t believe that they are, unfortunately.