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August 2019

Summer is starting to wind down and the kids will soon be headed back to school. Now is a great time to review if you've had, or will have, any special taxable events this year. The first article highlights five taxable items that come as a surprise to many people. This month's newsletter also includes spending traps to avoid when headed to the fair, ways to manage the burden of student loan debt, and cash flow strategies that can save your business.

Call if you would like to discuss how this information relates to you. If you know someone who can benefit from this newsletter, feel free to send it to them.

Contents

I Owe Tax on That?

5 Surprising Taxable Items

Wages and self-employment earnings are taxable, but what about the random cash or financial benefits you receive through other means? If something of value changes hands, you can bet the IRS considers a way to tax it. Here are five taxable items that might surprise you:

1040 Amount Owed

  1. Scholarships and financial aid. Applying for scholarships and financial aid are top priorities for parents of college-bound children. But be careful — if any part of the award your child receives goes toward anything except tuition, it might be taxable. This could include room, board, books, travel expenses or aid received in exchange for work (e.g., tutoring or research).

    Tip: When receiving an award, review the details to determine if any part of it is taxable. Don’t forget to review state rules as well. While most scholarships and aid are tax-free, no one needs a tax surprise.

  2. Gambling winnings. Hooray! You hit the trifecta for the Kentucky Derby. But guess what? Technically, all gambling winnings are taxable, including casino games, lottery tickets and sports betting. Thankfully, the IRS allows you to deduct your gambling losses (to the extent of winnings) as an itemized deduction, so keep good records.

    Tip: Know when the gambling establishment is required to report your winnings. It varies by type of betting. For instance, the filing threshold for winnings from fantasy sports betting and horse racing is $600, while slot machines and bingo are typically $1,200. But beware, the gambling facility and state requirements may lower the limit.

  3. Unemployment compensation. Unfortunately the IRS doesn’t give you a break on the taxes for unemployment income. Unemployment benefits you receive are taxable.

    Tip: If you are collecting unemployment, you can either have taxes withheld and receive the net amount or make estimated payments to cover the tax liability.

  4. Crowdfunding. A popular method to raise money for new ventures or to support a special cause is crowdfunding through websites. Whether or not the funds are taxable depends on two things: your intent for the funds and what the giver receives in return. Generally, funds used for a business purpose are taxable and funds raised to cover a life event (e.g., special causes or medical assistance) are considered a gift and not taxable to the recipient.

    Tip: Prior to using these online tools to raise money, review the terms and conditions and ask for a tax review of what you are doing. If you need to account for taxes, reserve some of what you raise for this purpose.

  5. Cryptocurrency. Cryptocurrencies like Bitcoin are considered property by the IRS. So if you use cryptocurrency, you must keep track of the original cost of the coin and its value when you use it. This information is needed so the tax on your gain or loss can be properly calculated. Remember, the tax rate on property can vary if you own the cryptocurrency more than a year, so record all dates.

    Tip: For those considering replacing cash with things like Bitcoin, you need to understand the gain or loss complications. For this reason, many people using cryptocurrency do so for speculative investment purposes.

When in doubt, it’s a good idea to keep accurate records so your tax liability can be correctly calculated and you don’t get stuck paying more than what’s required. Please call if you have any questions regarding your unique situation.


Headed to the Fair? Avoid These Spending Traps

If you’ve ever attended a state or county fair, you know it’s really easy to spend a lot of money, and fast. The best way to avoid overspending is to know the problem areas and be prepared. Here are five typical fair spending traps (and tips to avoid them):

  1. Family on roller coasterPaying full price for admission. In 2019, the price of admission for a state fair can cost a family of four well over $50. Most fairs offer pre-sale discounts or set aside days with special rates. Some examples include half-price admission days, opening day, closing day or certain days during the week. In addition to admissions discounts, you can often find discounted ride tickets or coupons for food or attractions before the day you head to the fair.
  2. Not having a food strategy. Do you really need that whole deep-fried onion? Or entire bucket of fries? If you go to the fair with some friends, opt for the small portion, wide variety strategy. Take turns buying the goodies and share. It’s a perfect way to try new things without overindulging! Your budget (and digestive system) will thank you later.
  3. Impulse buying. While it’s really cool that the blender can turn a bushel of apples into a smoothie in six seconds, it doesn’t mean it’s worth $300. There are a lot of fun and unique products to buy at the fair, but have a plan. If you will be doing some shopping, identify your needs and create a spending budget prior to taking in the product demonstrations.
  4. Ignoring the weather. All it takes is a pop-up thunderstorm or unexpected heat wave and you can watch the prices on ponchos and bottled water shoot up faster than Old Faithful at Yellowstone National Park. Before you go, check the weather, bring appropriate gear and empty water bottles to fill at free water stations.
  5. Falling for carnival gimmicks. All you need to do is make one of three basketball shots to win that huge pink gorilla. Don’t fall for it. Chances are the rim is one foot higher, two inches narrower and the ball might even be egg-shaped. Go ahead and give it a try for fun — just try not to get frustrated if you don’t hit the shot. Carnival games can be a good time if you have the right mindset. Treat them as entertainment, not a way to easily win a valuable prize.

Fairs are a great way to spend a late summer or fall day and make some memories. Saving some cash with some savvy decisions makes it even better!


Smart Tactics to Manage Student Debt

According to the Federal Reserve, U.S. student loan debt is now $1.5 trillion with more than 44 million borrowers. Only mortgage debt currently has bigger numbers among types of consumer debt. Even worse, more than 10 percent of these loans are past due. Here are some tactics to help make student debt easier to manage:

While student debt is often an unavoidable outcome of getting a college education, it can be minimized if actively managed. Small changes can yield results if planned for in advance.


Cash Flow Concepts That Can Save Your Business

A sad and oft-repeated truth is that half of all new businesses fail within the first five years. Although many factors contribute to business failure, a common culprit is poor cash management. All businesses, large and small, must deal with the uncertainty of fluctuating sales, inventories and expenses. Follow these practices to moderate the ebb and flow of cash in your business:

In box and out box with cash

By taking these steps and endeavoring to smooth out cash fluctuations, proficient managers keep their companies strong throughout the business cycle.



Newsletter Archive

Please note: Some material may be time-sensitive and may no longer apply.
Please contact us with any questions.
  1. Posted on: 2019-07-02
  2. Posted on: 2019-06-04
  3. Posted on: 2019-04-30
  4. Posted on: 2019-04-02
  5. Posted on: 2019-03-05
  6. Posted on: 2019-02-05
  7. Posted on: 2019-01-01
  8. Posted on: 2018-12-04
  9. Posted on: 2018-11-06
  10. Posted on: 2018-10-02
  11. Posted on: 2018-09-04