As the end of the year approaches, you may find yourself faced with some questions regarding your taxes. While your certified public accountant (CPA) or tax professional will be able to answer any questions or concerns you may have, it never hurts to educate yourself about any financial matter. To help you in that endeavor, here are some answers to common tax questions.
Whether you are filing single, married, or are a small business owner (SBO) filing your tax return as a C Corporation or other status, having a base knowledge about tax basics is a great way to ensure you get the most out of your year filing and reduce any tax liabilities you may face.
Earned Income Tax Credit Explained
Also commonly referred to as the EITC, the earned income tax credit is a subsidy created for low-income families who earn between a low to moderate income each year. Families who qualify in 2014 can receive up to $6,143 in tax credits.
Do I Qualify for the Earned Income Tax Credit (EITC)?
In order for you to qualify for the earned income tax credit, the following requirements must be met. For starters, all individuals listed on Schedule EIC have to have a valid social security number. In addition, you must have earned income by working for a company or person in the filing year. If you operate a farm, you also qualify.
For a list of all EITC requirements, visit the IRS’ page on Earned Income Tax Credit rules <http://www.irs.gov/Individuals/EITC,-Earned-Income-Tax-Credit,-Questions-and-Answers>.
Can I take the Home Office Deduction?
This is a somewhat tricky tax question that self-employed filers and small business owners often ask. To confuse matters more – or make them simpler depending upon your point of view – the IRS recently added a “simplified option” to those seeking the tax credit.
To qualify for the home office deduction, you must use part of your home exclusively for business on a regular basis. This does not mean you work on your laptop in your living room while watching television and hanging out with friends. The room should serve the primary function of office space.
In addition, your home has to be your primary place of business. That does not mean you cannot also have an office outside of the home. It simply means that your home has to be the main place where business is conducted.
Do I Qualify for the Small Business Health Care Credit
2014 saw some changes in the Small Business Health Care Credit, and if you are a small business owner, you may be asking yourself if you qualify for this tax break or not. If you meet the following requirements, you may get the credit:
- Have less than 25 full time employees
- The average salary of your employees is $50,000 or less per year
- You contribute a minimum of 50% to premium costs for full-time employees
- If you offer insurance coverage to full-time employees via the Small Business Health Options Program (SHOP) Marketplace.
If you meet the above criteria, you can qualify for up to 50% of your contributions in tax credits.