The IRS, in a recent News Release, announced that the federal tax filing season for 2016 will begin on Monday, 1/23/17, which means that electronic and paper returns will be accepted beginning on that day. According to the IRS, taxpayers claiming certain tax credits should expect a longer wait for refunds (until the week of 2/27/17). Beginning in 2017, the PATH Act requires the IRS to hold refunds on tax returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). The entire refund must be held, even if a portion is not associated with the EITC and ACTC, until 2/15/17. In 2017, tax returns are due on April 18, rather than the usual April 15, because of a weekend and the Emancipation Day holiday in the District of Columbia. News Release IR-2016-167.
Private School Tuition and School Uniforms
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Usually, profits you earn are taxable. However, if you sell your home, you may not have to pay taxes on the money you gain. Here are ten tips to keep in mind if you sell your home this year.
Going to the casino can certainly be fun but we all know how unpredictable winning and losing can be. Reporting these “winnings” and “losses” on your tax return can quickly become confusing especially if you go to the casino fairly often.
This can get even more confusing when you have been issued a Form W-2G from a jackpot that you may have won. More times than not, the amount shown on your Form W-2G is NOT the amount you won that night or even what you actually left the casino with.
For example, you start your session of play with $1000. On your last pull with that original $1000, you win a $3000 jackpot. You receive a Form W-2G for the $3000 and decide to keep playing. After you spend another $1000, you decide to pack up and leave the casino.
Ask yourself, “does the Form W-2G accurately reflect your winnings for the night?”
You spent $2000, which means you won only $1000 (referred to as your “wagering gain”). Now comes the tricky part….how do you report that on your tax return???
The IRS receives a copy of your Form W-2G, and it states you won $3000. The IRS wants to see you put $3000 on the front page of your tax return.
So, you do what a majority of people do….put $3000 on Form 1040, Line 21 and put $2000 on Schedule A Itemized Deductions Line 28. Easy, right?
But what if Schedule A doesn’t apply to you because the Standard Deduction is higher?
What if you collect Social Security and your Social Security gets taxed more because you have $3000 on Line 21?
There is much more advantageous way to report this. Following IRS Chief Counsel Advice 2008-011 is the reference material you’ll need to properly report “wagering gains” and “wagering losses.” And, if you aren’t interested in reading that, then simply come see us.
Record keeping is very important, so here’s a few tips:
The IRS is aware that small business owners sometimes misclassify items and may select business tax returns for an audit. This is generally done through random selection and does not indicate that the taxpayer or preparer made errors; this simply means that the IRS would like to review the return to ensure its accuracy.
In addition to this, the IRS may audit a business for several other reasons including:
When preparing for a business audit, documents and records that support reported items must be gathered. Taxpayers ought to be well organized in order to help the audit run smoothly and progress quickly.
In addition, taxpayers should create a list of various issues found while preparing for the audit; if a taxpayer is unable to support items reported on a tax return or a tax professional identifies other possible issues the taxpayer should write them down.
Next, it is important that taxpayers never falsify information or act unprofessional. The IRS simply wants to verify information reported on a tax return.
Finally, don’t delay the audit. Respond to all IRS notices and requests in a timely manner. Request extensions if deadlines cannot be reached. Delaying an audit will frustrate all parties involved and may cause the IRS to want to investigate further.
If you are being audited or have received any IRS notices regarding changes to a tax return please do not hesitate to contact us at email@example.com or 763-786-7899.
Everyone has a hobby of some sort, and many people are fortunate enough to make money from participating in that hobby. What often gets overlooked is reporting that hobby income on a tax return. Here are some things to consider relating to hobby income:
If you have any questions or would like to learn more about hobby income don’t hesitate to call us at (763) 786-7899. We will gladly answer any questions/concerns you may have!
If you go on a business trip within the U.S. and add on some vacation days, you know you can deduct some of your expenses. The question is how much.
First, let’s cover just the pure transportation expenses. Transportation costs to and from the scene of your business activity are 100% deductible as long as the primary reason for the trip is business rather than pleasure. On the other hand, if vacation is the primary reason for your travel, then generally none of your transportation expenses are deductible. Transportation costs include travel to and from your departure airport, the airfare itself, baggage fees and tips, cabs, and so forth. Costs for rail travel or driving your personal car also fit into this category.
The number of days spent on business vs. pleasure is the key factor in determining if the primary reason for domestic travel is business. Your travel days count as business days, as do weekends and holidays if they fall between days devoted to business, and it would be impractical to return home. Standby days (days when your physical presence is required) also count as business days, even if you are not called upon to work on those days. Any other day principally devoted to business activities during normal business hours is also counted as a business day, and so are days when you intended to work, but could not due to reasons beyond your control (local transportation difficulties, power failure, etc.).
You should be able to claim business was the primary reason for a domestic trip whenever the business days exceed the personal days. Be sure to accumulate proof and keep it with your tax records. For example, if your trip is made to attend client meetings, log everything on your daily planner and copy the pages for your tax file. If you attend a convention or training seminar, keep the program and take some notes to show you attended the sessions.
Once at the destination, your out-of-pocket expenses for business days are fully deductible. Out-of-pocket expenses include lodging, hotel tips, meals (subject to the 50% disallowance rule), seminar and convention fees, and cab fare. Expenses for personal days are nondeductible.
If you’re running your business you probably have a lot on your plate and those chores around the office just can’t seem to be completed. If you have children that need a job you ought to consider hiring them! This can provide some nice benefits for both you and your children.
If the family business is a sole proprietorship or a partnership with only you and/or your spouse as the owners/partners, your children may be exempt from Social Security tax until the 18th birthday! I’d recommend check the child labor laws first before putting them to work though!
Next, your children will typically be in a lower tax bracket than some others you could hire to take over the office chores. This means the income that would be taxed at your higher rate is passed down to your child’s lower tax rate. Instead of paying higher taxes and giving them a weekly allowance with the money you do end up with, this allows you to give them more money while benefiting from their work!
Here is what this could potentially look like (with simplified numbers and rates):
You are in the 28% tax bracket and you have to pay self-employment taxes. You have cleaning, filing, data entry, and other chores to be done. Upon hiring your child, you can deduct his/her wages against your business income. If you pay your child $11,800 here is what your savings would look like for 2015:
Tax Savings - Wage Deduction:
- Federal tax (11,800 x 28%) $ 3,304
- SE tax (11,800 x 15.3%) 1,805
- Your savings 5,109
Your child's tax:
- Wages $ 11,800
- Standard deduction 6,300
- Taxable income 5,500
- Federal tax (550)
Total savings for the family: $ 4,559
You could also help your child put away $5,500 into an IRA and bring the taxable income to $0!
NOTE: these wages paid to your child also are not subject to MN Unemployment taxes.
The tax season is approaching quickly which means that it is scam season as well. We are reminded to keep an eye out for the several aggressive phone scams claiming to be the IRS that are present during tax season. Many scammers will try to con you by demanding money to pay taxes or by saying you’re due a refund in order to lure you into giving them your banking information.
Last year, the IRS issued several warnings about these scams, signifying how pervasive they had become. The scams were reported to be very aggressive, and the elderly were targeted often. Victims were threatened with arrest, their utilities being shut off, revoked driver’s licenses, or deportation. These scammers were often very insulting and hostile in order to scare their potential victims.
If unsuccessful with their first attempts of luring victims in with big refunds or amounts due immediately, scammers would often call again with new strategies. Fake names and IRS badge numbers, finding the last four digits of victim’s SSN, and pretending to be the DMV or local police have all been tactics used to pressure victims into forfeiting their money or information to these scammers.
Fortunately, the IRS has given us several ways to spot a scam immediately. The IRS says they will never:
· Call about taxes owed without first mailing an official notice.
· Demand that you pay taxes without giving you the chance to question or appeal the amount owed.
· Require you to use a specific payment method, such as a prepaid debit card, credit card, check etc.
· Ask for credit or debit card numbers over the phone.
· Threaten to bring in local police or other law-enforcement to have you arrested for not paying.
If you identify a call as fraudulent you can report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484 or at www.tigta.gov
If you have any questions, or if you get a call and are wary, don’t hesitate to contact us immediately for help.
Over the past few months, I am noticing more and more signs referencing
E-CIGS or WE SELL E CIGARETTES or FOR SALE E CIGS
These signs seem to be sprouting up everywhere.
Are you someone that is already part of this fast growing market? Are you someone who wants to be part of this market?
As a CPA who is eager to assist those individuals starting a small business, I may be able to provide you with proper guidance BEFORE you begin to spin out of control.
Here is how I may help:
Obtaining Business Name and Identification Numbers
With the power of the internet, it is very easy for someone to register a business name and apply for the necessary identification numbers and, just like that, they are off and running.
I DO NOT ADVISE THIS! An hour discussion with me could prevent a few future headaches.
Minnesota Sales and Use Tax
Location, customers, resellers, online sales, online purchases, and more will play a factor in these types of taxes. Did I forget to mention, you will most likely be filing a report MONTHLY!
Minnesota Tobacco Tax
You think Sales & Use Tax is complicated....well the Minnesota Tobacco Tax is no picnic. And yes, you will most likely be filing this report EACH and EVERY MONTH!
Form W4, Form I9, Wages, Salary, Payroll checks, Direct Deposit, Payroll tax deposits, Payroll tax quarterly reporting, Form W2 do you have a handle on this?
Annual Income Tax Preparation
Do you realize that if you start a business on your own that your individual tax return (Form 1040) just received a turbo boost? You will have a minimum of two additional tax schedules....do you know what two? I do.
Give me a call at 763-786-7899 or send me an email at firstname.lastname@example.org to discuss further.