So you’re an environmentally-conscious individual or small business owner who missed the tax deadline, are you? There’s still ways to claim tax credits for all the eco-friendly initiatives you implemented in 2013 that keep the sting of tax time to a minimum with some smart tax incentives that promote green initiatives but gives you breaks on your taxes at the same time. Just be sure that your record-keeping is meticulous when claiming some of these credits because you can raise red flags that make you eligible for an IRS audit if you’re not careful.
This article outlines the many ways you can be rewarded by the tax man for being an environmental steward, and offers tips on how to avoid common pitfalls when filing your taxes. There’s also some instruction at the end of the article that let you know what to do since you missed the deadline to file your taxes.
Donations to Environmental Charities
Did you have a big heart last year and donate money to your favorite environmental charity? That can translate to big savings when you fill out your taxes this year. The IRS puts limits on your giving spirit, though, and you can deduct up to 50% of your adjusted gross income for the tax year the donation was paid. This credit applies to many other charitable causes, also.
Potential Red Flags to Avoid
It’s important that your charitable donations to the organization are recorded properly, or you may be looking at an appointment with an IRS auditor. Keep in mind, also, that you will need to be extremely careful with record-keeping of this type if you are donating more than 30% of your income to charity. It’s something that most people don’t do, so you will need proper documentation to back this up if the auditor notices it when you file your return.
For cash donations of less than $250, a receipt or cancelled check is sufficient, but they must display the amount of the contribution, the name of the organization, and date the contribution was made. On the other hand, if the contribution exceeds $250, it’s going to require written documentation from the charitable organization. This document must include the amount you donated and a statement of whether or not you received anything of value in return when you made your contribution.
Alternative Fuel Vehicle Tax Credits
One way to be friendly to the environment is to purchase an electric car for driving, but the price tag on many of them puts many consumers off. However, there are some tax credits available that may bring the car’s price tag back down to what you would pay for a regular gasoline-powered vehicle if you’re creative. The government has put in some really nice monetary incentives through tax credits to motivate consumers to buy alternative fuel vehicles. If you bought a plug-in electric drive vehicle in 2013, you’re in luck.
Here’s why – the minimum federal tax credit for qualified plug-in electric drive vehicles is $2,500, and the maximum credit is $7,500, depending on the battery capacity. That’s relevant because if you bought a car, such as a 2013 Chevrolet Spark plug-in electric drive vehicle, it retailed for about $27,495. Apply the $7,500 tax credit, and you have a vehicle that’s a slightly under $20,000 – about the price of other cars that aren’t so environmentally friendly. Not sure if the car you own is eligible for this credit, you can check to see if your car is on this list of eligible vehicles.
Don’t Wait to Take This Tax Credit
There’s no serious pitfalls to avoid here if you have all your paperwork in order, but be sure to take the credit this year because the ARRA will phase out the credit in 2014, or after the manufacturer sells 200,000 vehicles. Also, be sure to review the Internal Revenue Bulletin, Notice 2009-30; Section 5 Manufacturer’s Certification on IRS website to be familiar with the manufacturer’s certification guidelines – then verify that the manufacturer filled out the required certification to be eligible to claim the qualified plug-in electric vehicle credit on your taxes before the timeline expires.
Small Environmental Business Tax Credits
There are several tax credits that you can take advantage of for your small environmental business venture last year. Here’s two that business owners are eligible for:
Small Business Healthcare Credits
If you run a small green business you’re eligible for some pretty aggressive tax credits – up to a whopping 35 % of premiums paid for your employees health premiums if you meet all the eligibility requirements.
Here’s how it breaks down for you: if you meet the guidelines mentioned above and paid $50,000 toward your workers’ premiums, and also qualified for say, a 15 % credit, then the savings would be $7,500. To get this credit, you must pay at least 50 % of the cost of single health care coverage for all of your employees – the break doesn’t apply for family health care coverage. The small business must have had less than twenty-five full-time equivalent employees the previous year. Those full-time equivalents must make an average wage of less than $50,000 annually.
Changes to Note and Possible Issues to Avoid
The incentive goes up in 2014, but you’ll have to buy insurance through the SHOP Marketplace in order to have eligibility for years 2014 and forward. To avoid any issues when filling your taxes, use good accounting practices and keep good business records during the year previous to the filing. Small business accounting is usually something you don’t need to outsource, and you can either do this yourself manually, or buy accounting software that can make it easier.
Honeybee Agricultural Credits
This law varies by state, but if you are in the right one, those little honeybees not only work hard to pollinate plants and give you honey – they’ll earn you an agricultural property tax credit, as well. Bees are considered agriculture in many states like Florida, and the state allows an agricultural tax credit for raising honeybees if you meet the requirements to lease them. That means if you met eligibility requirements and rented and raised bees on your land last year, then you may get an exemption of up to 25 % off your property taxes.
However, if you didn’t raise bees last year and want to rush out and try to take an exemption or set up a bee colony for next year’s tax credit, there are many regulations governing it that vary from state to state and even county to county that can be very sticky if you’re not careful.
Watch Out for Fraud Pitfalls
There’s been instances of fraud in this industry, and that is definitely something that could get you in serious trouble with the IRS – maybe even serious trouble. There are individuals that are unwittingly doing it, but there are also some people that are just leasing the land and paying for the bees who aren’t placed close enough to any flowers to live. The bees die because they can’t fly far enough to find a food source. If that’s done on purpose, it’s not only fraud, it’s cruel to the dwindling population of honeybees.
The Florida laws governing beekeeping clarify the law the best by indicating that you just can’t keep bees on your property and call it a day; you have to prove to officials that you’re making a profit on the bees or the honey. Be sure to talk with a county assessor or an official that can direct you to the requirements needed for your property before beginning this type of business venture. You want to make sure you don’t miss out on a chance to capitalize on this credit and lend a hand to the honeybee recovery efforts.
Residential Energy Property Credits
The Non-business Energy Property Credit can get you a quick tax credit worth up to $500 when filing your 2013 tax returns. The credit is found on part two of the 5695 form. The credit has spending limits, so make sure you don’t go over it – also make sure those improvements were installed in your main residence by Dec. 31, 2013. One example of its use would be to spend $300 for a heat pump or air conditioner and claim it on form 5695. It’s important to note the overall $500 tax credit cap is applicable to individuals that got a previous energy tax credit that started January1, 2005.
No Issues if You Have Good Records
This tax break like others requires you to keep tight records and worksheets, but if you are eligible, your tax bill reduced for you a dollar-for-dollar amount – and every little bit counts.
Paperless Tax Return
Going paperless on your tax return won’t get you any money back, but you are getting a return for the planet when you do it. An added bonus: you can often save a lot of money with using tax software to file your taxes – and save trees while doing it. Environmentally aware individuals know that trees are one of Earth’s greatest biological treasures, and that we are beginning to lose them just as we started to learn their true value. Researchers estimate that the last of the rainforests could disappear in as little as forty years.
You can do something about it at tax time by going paperless and filling them out electronically. Many people are switching from mailing their returns to electronic filing services by using professional online tax filing services or preparing them electronically using online tax forms and submitting them to the IRS. The added benefit to the environment is that you no longer depend on paper to prepare your taxes and mail them in. Forms can be viewed and filled out online, and the whole process is done electronically with no paper usage involved – at least on your side.
Check Your Return-The Auditor Will
According to the IRS, the error rate for a paper return is about 21% percent, and the rate for returns filed electronically hover around 0.5 %- Don’t be a part of that 0.5% if you are going to file electronically. Data entry errors on your filings are a common problem, and a big red flag for auditors. It’s easily preventable, though, so be sure to double-check your return or have a professional CPA or tax preparer look over your finished tax documents. They’ll likely charge a fee, but it’s cheaper than having them prepare your total tax package, and much better than the IRS finding an error when they are going over your completed return.
What To Do if You Filed Late
If you missed the deadline on April 15 to file your taxes, there’s no need to be worried if you’re getting a refund. Filers have until April 15, 2017, and until October 15, 2017 with an extension, to file your 2013 tax returns with the IRS before the statute of limitations expires on your refund. After that, the U.S. Treasury will poocket your refund as a “donation.” If you owe back taxes, you need to file your return as soon as possible even if you can’t pay the total right away. The penalty for late filing can be ten times greater than the late payment penalty, and the more you wait, the worse it gets.
If you file your tax return after April 15th, filing is typically the same as normal procedures–check to make sure you have all the tax-related documents for deduction and income, prepare the tax returns, review them for accuracy and completeness, and then send the returns to the IRS.
Services that Help When There is an Issue
Some people wait really late, haven’t kept as good of records as they should have, kept some really spotty bookkeeping–you name it. They wind up getting in trouble with the IRS–that’s one of the worst case scenarios. According to InstTaxSolutions, a tax relief legal service, many people that have got to this stage feel it is an insurmountable problem, but there are services that can help filers understand their legal options and bring it down to something that can be better managed.
These suggestions are just a few ways you can be an advocate for green initiatives and get some of your money back at tax time. Keeping excellent records and researching all the regulations and documentation required at tax time will almost always protect you if you are scrutinized by the IRS. Should the IRS decide that they are going to audit you, there may be little you can do to keep it from happening. You are always in control of making sure you aren’t singled out by the IRS’s extra attention, though. The tax season can be very hectic seem hectic and taxpayers don’t want to get audited so it’s very important to find file on time.