Five Tax Credits That Can Reduce Your Taxes

Tax credits help reduce the taxes you owe. Some credits are also refundable. That means that, even if you owe no tax, you may still get a refund.

Here are five tax credits you shouldn’t overlook when filing your 2013 federal tax return:

1. The Earned Income Tax Credit is a refundable credit for people who work but don’t earn a lot of money. It can boost your refund by as much as $6,044. You may be eligible for the credit based on the amount of your income, your filing status and the number of children in your family. Single workers with no dependents may also qualify for EITC. Visit IRS.gov and use the EITC Assistant tool to see if you can claim this credit. For more see Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit can help you offset the cost of daycare or day camp for children under age 13. You may also be able to claim it for costs paid to care for a disabled spouse or dependent. For details, see Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit can reduce the taxes you pay by as much as $1,000 for each qualified child you claim on your tax return. The child must be under age 17 in 2013 and meet other requirements. Use theInteractive Tax Assistant tool on IRS.gov to see if you can claim the credit. See Publication 972, Child Tax Credit, for more about the rules.

4. The Saver’s Credit helps workers save for retirement. You may qualify if your income is $59,000 or less in 2013 and you contribute to an IRA or a retirement plan at work. Check out Publication 590, Individual Retirement Arrangements (IRAs).

5. The American Opportunity Tax Credit can help you offset college costs. The credit is available for four years of post-secondary education. It’s worth up to $2,500 per eligible student enrolled at least half time for at least one academic period. Even if you don’t owe any taxes, you still may qualify. However, you must complete Form 8863, Education Credits, and file a tax return to claim the credit. Use theInteractive Tax Assistant tool on IRS.gov to see if you can claim the credit. Publication 970, Tax Benefits for Education, has the details.

Before you claim any tax credit, be sure you qualify for it. Find out more about these credits on IRS.gov. You can also get free IRS forms and publications on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Self-paced learning for Accountants and Bookkeepers

Xero Blog writes: Accountants and bookkeepers can now experience self-paced e-learning inside Xero. The new Training tab in My Xero for Partners is now available, where accountants and bookkeepers can learn online about Xero at their own pace – anywhere, anytime.

This exciting release will be rolled out for the UK and NZ editions of Xero, followed by the US and Australia, and comes after last month’s launch of Xero U, which brings live training events like webinars and classroom courses together in one place at xero.com/xero-u.

More than ever, we’re on the move and we’re busy, and not everyone in your accounting practice is on the same schedule. Self-paced learning will enable your practice staff to become certified Xero experts,  complete other courses, and monitor training progress to continue growing and accelerating your practice.

Check out our video to see how it works!

10 Great apps for busy freelancers: accounting, contracts, etc.

Glory Edim for FreeLancersUnion.org writes: Becoming a freelancer means you’re the boss. Not only are you responsible for managing the project, you’re also in charge of accounting, creating contracts and tracking billable hours.  That means you have to be inventive handling your workload and find gadgets to GTD effectively.

Here is a list of 10 tools/apps to support your life as an fantastic freelancer. Whether you’re typing ideas on your smartphone, blogging at your local coffee shop or attending meetings at the latest co-working space, you’ll be synced up and ready to go:

To-do lists

Teux Deux

Teux Deux is an effective to-do list that will appeal to minimalist design lovers. With its simple white background, color-coded days, and clear display of tasks, the app forces you to focus on productivity. Users who prefer simple "bare-bone" layouts and simple functionality will benefit from this platform.

Wunderlist

Wunderlist is a task management tool that allows you to share your daily to-do lists. The app has a robust interface made up of tasks and lists, which easily syncs across all devices. You can prioritize projects with a star, create due dates, and add reminder alarms. The functionality also includes creating subtasks, assigning items to other users and adding specific notes via e-mail.

Project Management Tools

Evernote

Evernote is designed for unlimited note taking and archiving. The app allows you to take notes, save web pages, and even digitize documents. You can input notes directly into the mobile app or use the browser-based web clipper to capture inspiration you find online. The search feature and tags help keep your notes organized and enhance the tool’s functionality. By adding checklists and due dates you can use Evernote as your task manager. Plus, it syncs across all devices, serving as a catch-all for anything you want to remember, wherever you are.

Trello

Trello is a free web-based collaboration tool that organizes your projects into boards. You can easily organize all of the components for your projects into columns and cards, along with assigning task to team members and adding specific comments. The platform is modeled after the Personal Kanban system which helps you visualize, organize, and complete work. Trello is intuitive and ideal for any type of workflow. Additionally, it works in real time, making communication efficient and collaboration seamless.

Accounting

Wave

Wave Accounting is a free alternative for people who need accounting software to manage the day-to-day aspects of their business with ease. The tool caters to freelancers and offers detailed reports, along with the ability to add accounts and directly link bank information from the app's console. The interface for the Wave application is intuitive and there is helpful advice throughout the experience.

Cloud storage

Dropbox

Dropbox is a cloud-based file sharing service that allows users to save files — including documents, spreadsheets, photos, videos, and music, to the cloud and sync it with your computers, phones, and the Dropbox website. Users get 2 GB of Dropbox for free and you have access to files across multiple devices, saving you from having to email documents back and forth. While you can easily collaborate on documents with Google Docs, if you’re a freelancer who needs to transfer files to other contractors or clients, Dropbox is an ideal solution.

Creating legal contracts

Shake

Shake is a mobile app that allows users to create, sign, and send legally binding agreements from their phones. The app is simple to use and everything from non-disclosure agreements to merger clauses can be generated and signed on the platform. Shake also offers contract agreements related to freelancing, confidentiality, buying/selling, renting, and loaning money.

Time tracker

Timely

Timely is a well-designed time tracking app. Timely’s tracking method is to work from people’s existing schedules rather than make them create and fill in details of events after they’ve happened. The interface is intuitive and easy to use. Users migrate their schedule to Timely and then move appointments around its calendar-like layout adjusting things accordingly. It’s particularly helpful in tracking hours spent on client work.

Harvest

Harvest is a versatile, convenient time management tool that compiles detailed reports so you can see the time distribution for your work . You can also create a quick invoice which retrieves project hours and expenses instantly.

Eliminating distractions

Focus Booster

Focus Booster is a simple software tool designed to help focus on the task at hand. The app uses the Pomodoro Technique, a time management method created by Francesco Cirillo.  The technique dissects work into 25-minute sections known as "pomodoros" that are separated by 5-minute breaks. If you find yourself easily distracted, (i.e. Twitter statuses and Facebook updates) this app may help you concentrate and minimize online interruptions.

Nothing Like the Last Minute: Tax-Filing Tips for Corporations / This is majorly last minute, but if you haven't filed your taxes yet, you still have options. Here's a look at new features to expect this year, as well as tips on how to file an extension.

Barbara E Waltman for Inc. writes: This upcoming Monday isn't just St. Patrick's Day, it's also tax day for many small business owners.

If you own a corporation that reports on a calendar year, March 17 is the tax-filing deadline for your corporation’s income tax return for 2013. March 15, the normal filing deadline, is a Saturday this year.

While surely many of you have long ago prepared for this annual filing deadline, there are bound to be many who've let it slip. If you did, you'll obviously be crammed for time. To cut through the morass, here's a brief outline of the new features and requirements that you should know before you file, as well as tips on how to file for an extension:

New 2013 Forms and Schedules

Regular, or C, corporations file Form 1120, while S corporations file Form 1120S. There are some changes related to Form 1120S to consider. S corporations may need to complete a new Schedule B accompanying their Form 1120S. This schedule is required if they have any shareholder who is a disregarded entity--that is, a limited liability company with one owner, trust, or estate.

S corps also have to complete Form 1125-E to report compensation paid to owner-employees if the corporations’ gross receipts are $500,000 or more. This form was not mandatory for S corporations in the past.

A New Medicare Tax for Some Shareholders

S corporations generally do not pay taxes. Their owners pay taxes on their share of the corporations’ net income. To enable owners to figure their personal taxes, S corporations must issue these schedules to shareholders. Schedule K-1 tells shareholders their share of income, deductions, credits, and other items.

New on this year’s Schedule K-1 is code “U” of box 17 for reporting information related to the net investment income (NII) tax. This is an additional Medicare tax of 3.8 percent on the lesser of net investment income or the shareholder’s modified adjusted gross income over his or her threshold amount that depends on tax filing status. The former code U of box 17 of an S corporation’s Schedule K-1 has been redesignated as code V to report other information.

Note: A shareholder’s net income from an S corporation is treated as investment income unless the shareholder is active in the business. Participating in daily business activities and receiving a salary from the corporation indicate active participation. There’s guidance from the IRS on determining active participation and other rules for the NII tax. And salaries and other taxable compensation paid to owner-employees of C and S corporations is subject to the 0.9 percent additional Medicare tax if earned income exceeds a threshold amount that depends on tax filing status.

Filing a Tax Extension

When in doubt, you can still file an extension. This will automatically give the business six more months--to September 15--to file the 2013 income tax return without penalty. Use Form 7004 and enter the correct form code in the box provided for this purpose: code 12 for C corporations and code 25 for S corporations.

Be sure to submit the extension request no later than March 17. This can be done by paper or electronically.

Deducting Your Home Office, Made Simpler This Year

ANN CARRNS for NY Times writes: If you work at a home-based business, you may want to consider a new, simpler option for taking a deduction for your home office on your federal income tax return this year.

The Internal Revenue Service announced last year a streamlined option for the home office deduction, effective for the 2014 filing season. The agency said the new “common sense” alternative aims to reduce paperwork and record-keeping hassles for those who claim the home office deduction.

Approximately 3.3 million taxpayers claimed nearly $10 billion with the deduction in the tax year 2011, the I.R.S. said.

The new “simplified” option involves multiplying the square footage of your home office — up to 300 square feet — by a fixed amount of $5 to determine your deduction, which is capped at $1,500.

To claim the optional deduction, you can complete a short work sheet found in the tax instructions and enter the result on your tax return. (If you’re self-employed, you claim it on Schedule C, Line 30; if you’re employed for someone else, but use a home office, you claim it on Schedule A, Line 21.)

Previously, the only way to claim the deduction required filling out Form 8829, a 43-line document. That option — which the I.R.S. calls the “regular,” or standard method — can involve complex calculations of allocated expenses and depreciation, and carry-overs of unused deductions. That approach, the agency said, can be “burdensome” for small-business owners, because they have to keep all sorts of records, like mortgage and utility statements, to calculate their deduction.

If you use the new option, you can’t depreciate the portion of your home used for business. But you can claim allowable mortgage interest, real estate taxes and insurance losses on your home as itemized deductions on Schedule A. These deductions don’t have to be allocated between personal and business use, as the regular method requires.

As with taxes in general, however, things can be tricky even if they appear simple at first. The new method may be a particularly good option if you’re less than diligent about keeping expense records for use of your home office, said Jessi Dolmage, a spokeswoman for TaxACT, a provider of online tax preparation software. If you do keep detailed expense records, though, you might be better off using the standard method. To be sure, you have to calculate the deduction using both methods. So much for fewer hassles.

Using the regular approach may yield a larger deduction, said Ms. Dolmage, particularly if your office is small.

To get a quick idea of whether the simplified option makes sense, you can multiply your home office’s square footage by $5, and compare the result with your deduction on last year’s tax return. If the result is more or about the same, you can go with the simpler form. But if it’s less, you may want to take the time to calculate your actual expenses.

“If historically you’ve taken a larger deduction, you might be better off with the old-fashioned method,” said Mark Luscombe, principal federal tax analyst for CCH, a tax information provider.

Here are some additional questions about the home office deduction:

■ Does the simplified option make it easier for my work space to qualify as a home office for tax purposes?

No. The simplified option doesn’t change the criteria for a home office; it just reduces the calculations and record-keeping requirements associated with taking a deduction for its expenses. To qualify, you still must use the space regularly and “exclusively” as your principal place of business, according to Mr. Luscombe of CCH. (That means your home office can’t double as, say, your child’s playroom.)

If you work as an employee of a business, rather than being self-employed, your home office must be for the convenience of your employer in order to qualify.

■ If I moved last year and used home offices in different houses, can I use the simplified option?

Yes — but for just one of the homes. The deduction for the other home must be calculated using actual expenses, according to the I.R.S.

■ Where can I find more details about using the simplified option?

See I.R.S. Publication 587, Business Use of Your Home, available online. Or or visit the I.R.S. website for some frequently asked questions about the new option.