It’s important that you use the correct filing status when you file your tax return. Your status can affect the amount of tax you owe for the year. It may even affect whether you must file a tax return. Keep in mind that your marital status on Dec. 31 is your status for the whole tax year. Sometimes more than one filing status may apply to you. If that happens, choose the one that allows you to pay the lowest tax.

IRS e-file is the easiest and most accurate way to file your tax return. The tax software you use to e-file helps you choose the right filing status. Remember, most people can use tax software and e-file for free with IRS Free File. The free service is only available through the IRS.gov website. Just click on “Free File” on the IRS.gov home page.

Here’s a list of the five filing statuses:

1. Single. This status normally applies if you aren’t married. It applies if you are divorced or legally separated under state law.

2. Married Filing Jointly. If you’re married, you and your spouse can file a joint tax return together. If your spouse died in 2014, you often can file a joint return for that year.

3. Married Filing Separately. A married couple can choose to file two separate tax returns. This may benefit you if it results in less tax than if you file a joint tax return. It’s a good idea for you to prepare your taxes both ways before you choose. You can also use it if you want to be responsible only for your own tax.

4. Head of Household. In most cases, this status applies if you are not married, but there are some special rules. You also must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Don’t choose this status by mistake. Be sure to check all the rules before you file.

5. Qualifying Widow(er) with Dependent Child. This status may apply to you if your spouse died during 2012 or 2013 and you have a dependent child. Certain other conditions also apply.

Note for same-sex married couples. In most cases, you and your spouse must use a married filing status on your federal tax return if you were legally married in a state or foreign country that recognizes same-sex marriage. That’s true even if you now live in a state that doesn’t recognize same-sex marriage. Visit IRS.gov for more information.

Nearly everyone can claim an exemption on their tax return. It usually lowers your taxable income. In most cases, that reduces the amount of tax you owe for the year. Here are the top 10 tax facts about exemptions to help you file your tax return.

1. E-file your tax return. Filing electronically is the easiest way to file a complete and accurate tax return. The software that you use to e-file will help you determine the number of exemptions that you can claim. E-file options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance.

2. Exemptions cut income. There are two types of exemptions. The first type is a personal exemption. The second type is an exemption for a dependent. You can usually deduct $3,950 for each exemption you claim on your 2014 tax return.

3. Personal exemptions. You can usually claim an exemption for yourself. If you’re married and file a joint return, you can claim one for your spouse, too. If you file a separate return, you can claim an exemption for your spouse only if your spouse:

• had no gross income,

• is not filing a tax return, and

• was not the dependent of another taxpayer.

4. Exemptions for dependents. You can usually claim an exemption for each of your dependents. A dependent is either your child or a relative who meets a set of tests. You can’t claim your spouse as a dependent. You must list the Social Security number of each dependent you claim on your tax return. For more on these rules, see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. You can get Publication 501 on IRS.gov. Just click on the “Forms & Pubs” tab on the home page.

5. Report health care coverage. The health care law requires you to report certain health insurance information for you and your family. The individual shared responsibility provision requires you and each member of your family to either:

• Have qualifying health insurance, called minimum essential coverage, or

• Have an exemption from this coverage requirement, or

• Make a shared responsibility payment when you file your 2014 tax return.

Visit IRS.gov/ACA for more on these rules.

6. Some people don’t qualify. You normally may not claim married persons as dependents if they file a joint return with their spouse. There are some exceptions to this rule.

7. Dependents may have to file. A person who you can claim as your dependent may have to file their own tax return. This depends on certain factors, like the amount of their income, whether they are married and if they owe certain taxes.

8. No exemption on dependent’s return. If you can claim a person as a dependent, that person can’t claim a personal exemption on his or her own tax return. This is true even if you don’t actually claim that person on your tax return. This rule applies because you can claim that person is your dependent.

9. Exemption phase-out. The $3,950 per exemption is subject to income limits. This rule may reduce or eliminate the amount you can claim based on the amount of your income. See Publication 501 for details.

10. Try the IRS online tool. Use the Interactive Tax Assistant tool on IRS.gov to see if a person qualifies as your dependent.

Are you still using the old school method of doing your taxes? Do you still mail paper forms to the IRS? If so, make this the year you switch to a much faster and safer way of filing your taxes. Join the nearly 126 million taxpayers who used IRS e-file to file their taxes last year. Here are the top five reasons why you should file electronically too:

1. Accurate and easy. IRS e-file is the best way to file an accurate tax return. The tax software that you use to e-file helps avoid mistakes by doing the math for you. It guides you every step of the way as you do your taxes. IRS e-file can also help with the new health care law tax provisions. The bottom line is that e-file is much easier than doing your taxes by hand and mailing paper tax forms.

2. Convenient options. You can buy commercial tax software to e-file or ask your tax preparer to e-file your tax return. You can also e-file through IRS Free File, the free tax preparation and e-file program available only on IRS.gov. You may qualify to have your taxes filed through the IRS Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs. In general, VITA offers free tax preparation and e-file if you earned $53,000 or less. TCE offers help primarily to people who are age 60 or older.

3. Safe and secure. IRS e-file meets strict security guidelines. It uses secure encryption technology to protect your tax return. The IRS has safely and securely processed more than 1.3 billion e-filed tax returns from individuals since the program began.

4. Faster refunds. In most cases you get your refund faster when you e-file. That’s because there is nothing to mail and your return is virtually free of mistakes. The fastest way to get your refund is to combine e-file with direct deposit into your bank account. The IRS issues most refunds in less than 21 days.

5. Payment flexibility. If you owe taxes, you can e-file early and set up an automatic payment on any day until the April 15 due date. You can pay electronically from your bank account. You can also pay by check, money order, debit or credit card. Visit IRS.gov/payments for more information.

Here are 5 crucial Payroll Tax
and HR updates for 2015…

1. The California State Disability Insurance (SDI) withholding rate for 2015 is 0.9% (was 1% in 2014)

2. The 2015 taxable wage base for the Social Security is $118,500 (was $117,000 in 2014)

3. California Paid Sick Leave takes effect July 1st: The Healthy Workplaces, Healthy Families Act now requires all California employers to provide at least 3 days of paid sick leave to all employees who work 30 or more days in California, including part-time and temporary employees. While accrual and ability to use this sick leave begins July 1, 2015, posting and notice requirements are in effect as of January 1st.

4. Affordable Care Act Employer Mandate: Employers with 100 or more full time equivalent employees are now required to offer health insurance coverage or face a possible penalty.

5. Labor Contractor Requirements: California Business entities with 25 or more workers that contract with staffing agencies or outside labor providers are now accountable for wage and hour violations. If the labor contractor fails to pay its employees properly or to provide workers’ compensation coverage, the law imposes legal responsibility on the client employer.

Several of the most common benefit plans and account types have an increased allowance for contribution limits in 2015. The IRS has announced that it will raise the annual dollar limit on contributions for health care flexible spending accounts (FSAs), health savings accounts (HSAs), and 401(k) accounts based on cost of living adjustments (COLAs). These limits are reviewed annually by the IRS.

Health Care Flexible Spending Accounts (FSA)- The maximum allowed amount that an employee can contribute to an employer-sponsored health care FSA will be $2,550 in 2015 which is a $50 increase from the previously allowed amount of $2,500.

Health Savings Accounts (HSA)- The maximum allowed contribution amount for individuals to a Health Savings Account will increase by $50 for 2015 going from $3,300 to $3,350. The limit for contributions for a family will also increase in 2015 going from $6,550 to $6,650, an increase of $100.

401(k) Accounts- In 2015, employees will be able to contribute up to $18,000 for the year to their 401(k) account. This is a $500 increase from 2014. This increase also applies to several other types of retirement accounts such as 403(b) accounts and profit-sharing plans.

Employers that offer FSA, HSA and 401(k) accounts should ensure that they have communicated these increases to their employees if the employer decides to adopt the higher limits for 2015. These increases may also require changes and revisions to existing written employer communications and to open enrollment materials.

California Minimum Wage has increased to $9.00 per hour.

For more information visit:

http://www.dir.ca.gov/dlse/faq_minimumwage.htm

MW-2014

When running a small business, you have to make sure you stay focused on accounting. If you don’t manage debt, receivables, and marketing expenses accurately, your company will sink before it grows.

You can save your company by implementing simple bookkeeping strategies. Here are five accounting tips to help grow your business.

1. Weigh the options of bookkeeper vs. DIY accounting.

Though entrepreneurs might feel ready to act as head of accounting, sales, and marketing at the same time to cut costs, it may help to hire a bookkeeper. It can help you to know someone with experience and deeper understanding is working on your books. To start, you can hire someone part time or as a freelancer, so you’re not paying a full time wage for these services.

2. Keep accounts receivable payments separate from borrowed funds.

Small business owners need financial backing and/or loans for startup capital, marketing campaigns, and other initial things in the early days. To make sure the loans don’t appear in the receivables, use software that separates income from borrowed funds. Don’t lose sight of what is yours and what needs paying back.

3. Don’t allow clients to get away with not paying balances.

Seeing a large amount in the receivables column is a good thing, but the money doesn’t really count until it is in your bank account. Don’t let clients avoid regular payments. Stand firm and insist you receive payment for past orders before letting them have more materials or services. The receivables department is crucial in keeping your company afloat.

4. Detail daily expenses so you can budget for the coming weeks.

It’s a good idea for business owners to keep records of everyday expenses they incur in the company. Instead of calculating expenses every two weeks for payroll purposes, focus on every day or every week. This can help you have a better idea of where finances are each week and how much money you’ll need to budget for in the upcoming weeks.

5. Calculate a minimum monthly profit.

When planning how much it takes to keep a small business running, the numbers can get complicated. Devise an accurate system of expenses and regular obligations so you know exactly the minimum income you need every month. Because income can be the easiest to calculate, make a strict target you’ll need to earn. Without that exactitude, accounting becomes confusing and your business can suffer.

Accounting is as important your first week in business as it is during tax filing time. Use these five accounting tips to keep your business’s finances healthy and stable every day of operation.

In response to many requests of what tax records should be kept and how long, we have prepared the following list for your reference based on Federal Laws.

Income tax returns and supporting documents – Keep at least 4 years and preferably 7 if space is not critical. Once this period has elapsed, the documents can be discarded, but the returns themselves, which do not take much space, should probably be retained indefinitely.

Residential property records – All escrow statements (purchase and sale) plus receipts for improvements should be kept for at least 5 years after property is sold. (Including refinance papers)

Purchase receipts for stocks, bonds, mutual funds – These should also be kept for at least 5 years after the asset is sold. This would include record of stock dividends, splits and reinvested dividends.

Depreciation records – For any rental real estate or depreciable business property you own, keep records of the property’s cost, date acquired, and schedule of depreciation claimed in previous years. This record should be kept until 5 years after the property is disposed of.

Retirement plan contributions – Records of non-deductible IRA deposits, employer plan stock purchased, rollovers, and Keogh plan deposits should be kept until 5 years after the plan assets have been withdrawn.

Personal records – Important papers such as estate and gift returns, divorce and property settlement agreements, deeds, title insurance policies, and all trust documents should be kept in a permanent file, or perhaps a safe deposit box.

Miscellaneous papers – All other documents to include bank statements, canceled checks, credit card statements, deposit slips, charitable contribution receipts, and medical bills can be discarded after 5 years.

This Action Plan requires five steps:

1. List your regular monthly bills, such as your mortgage or rent, car loan, utilities, phone, Internet service, cable TV, credit-card bills (and any interest you pay, too), insurance premiums and child-care expenses.

2. Track your out-of-pocket spending for a week. Keep track of all the money you spend for a week on groceries, gas, meals, clothes, entertainment, personal items, and even sodas and snacks, which can all add up. Keep a small notebook with you, use this expense chart or just collect the receipts during the day and add them to the list in the evening. Keep track of all expenses for the week, whether you pay for them in cash or use a debit card, credit card or check.

3. Review the numbers. Now that you can see how you’ve spent your money, look for ways to save. Some strategies may be simple, like cutting back on meals out or using in-network ATMs to avoid fees. You may also want to make bigger changes that can save more money, such as cutting back on your cell phone package or dropping cable TV.

4. Review your big-ticket expenses. After you’ve reviewed your regular expenses, it can also help to review your big-ticket bills for the past year—the special expenses such as home improvements, car repairs, travel, education, furniture and electronics. These bills don’t crop up every month but can make a big difference in your finances—and can land you in debt if you aren’t prepared. Go through your credit card statements, bank records and receipts to list the cost of these items. If you don’t have good records of these expenses from the past year, start keeping a log of them from this point forward. Looking at these irregular costs will help you plan better for emergencies and other unexpected bills.

5. Create a plan. Review all of your expenses for ways to cut back, then decide what to do with the extra money. Set specific goals, such as building an emergency fund, paying off your credit-card bills, or increasing your retirement savings.