Should You Take the IRS-Approved Shortcut for Business Driving?

Should You Take the IRS-Approved Shortcut for Business Driving?

Lots of people are curious about the IRS-Approved shortcut for business driving and if the shortcut should be taken or not. This article from Accountingweb.com could help you decide. The IRS imposes strict record-keeping requirements for taxpayers who use their vehicles for business driving. But at least you can avoid some of the hassle if you use the shortcut approved by the IRS. The question is: Does it make sense to do it on your tax return? Frequently, the answer is “no.” You may find that you’re entitled to a bigger write-off – sometimes, much bigger – if you’ve kept all the records required under the tax law. For starters, if you use your vehicle for business travel, you generally have a tax return choice: deduct actual expenses or use the IRS standard mileage rate. With the actual expense method, you can write off actual expenses attributable to business travel – such as gas, oil, tires, insurance, repairs, licenses, registration fees, etc. – plus a depreciation allowance based on business use. For example, if you use your car 80 percent for business, you can claim a depreciation for 80 percent of the usual depreciation allowance under the IRS table. Plus, you may be entitled to 50 percent “bonus depreciation” for a vehicle placed in service in 2016. Note that annual depreciation deductions are limited by the “luxury car” rules that actually apply at moderate cost levels. The maximum first-year deduction for a passenger car placed in service in 2016, including bonus depreciation, is $11,160 (or $3,160 without bonus depreciation). Therefore, a depreciation deduction based on 80 percent use is...
What Type of State Taxes Should You Deduct?

What Type of State Taxes Should You Deduct?

Are you wondering what type of taxes you should deduct on your federal income tax return? I recently saw a blog by Ken Berry on accoutningweb.com, and thought I’d share the information with you. Here is what he had to say: It’s a given that you can deduct state and local taxes on your 2016 federal income tax return if you’re an itemizer. But what kind of taxes? Normally, the deduction covers state and local income taxes, but you can elect to write off state and local sales taxes instead if it suits your needs. Usually, you should go with the deduction that produces the biggest tax payoff. The optional deduction for state and local sales taxes, which has expired and been revived several times in the past, was recently extended by the Protecting Americans from Tax Hikes (PATH) Act of 2015. The PATH Act made this election permanent once and for all. Typically, you’ll still come out ahead if you deduct income taxes, especially if you’re a resident of a high-tax state, like California or New York. The deductible amount includes amounts withheld from your paycheck and quarterly estimated tax payments. For upper-income taxpayers, the figure often reaches into five figures. However, in some cases the deduction for sales taxes will be preferable if you purchased several high-cost items in 2016. Furthermore, if you live in a state with relatively low income tax rates or one of the seven states with no income tax – Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming – you’ll likely fare far better by deducting state and local sales taxes. There are two ways to do it....
5 Key Tax Issues for Business Leaders in 2017

5 Key Tax Issues for Business Leaders in 2017

This week I read this interesting article written by Ken Berry on Accountingweb.com. He discussed 5 key tax issues that business leaders might have to deal with in 2017. His information is located below. In the new year, companies are looking ahead to make the tax laws work for them. To remain competitive in a new political environment, maximizing tax incentives, engaging in the political process, and installing state-of-the art tax systems can make the difference in driving the success of an organization. “In an uncertain and disruptive business environment, the watchword for success is ‘nimble,’” Jeffrey LeSage, vice chairman of tax at KPMG LLP, said in a written statement. “Our list of issues highlights how tax can continue to be a key driver of success in 21st-century organizations.” LeSage and KPMG have compiled a tax-action list for business leaders in 2017, which LeSage said “is critical for organizational success.” Here are LeSage’s five action items for business leaders in 2017: 1. Monitor the New US Tax Landscape. For the first time in decades, the chances for substantive tax reform appear good. If Senate Republicans and Democrats can agree to the outlines of a significant tax overhaul, or if Republicans can push through the plan on their own, the possibilities for reform exist. Issues that will likely be discussed include corporate tax rate reductions, a tax system where only income earned inside the United States is taxed, a border-adjustable tax, and special rates for pass-through income. “US tax reform is more than just rate reduction, and any plan will likely have winners and losers,” LeSage said. “Company leaders need...
2017 SBA Emerging Leadership Course

2017 SBA Emerging Leadership Course

I saw some information that I thought would be helpful to business owners and I wanted to share it. The SBA is offering a leadership class to help plan the growth of small businesses. Here is what they are sharing about it: Is Your Business on the Brink of Major Growth? Apply for the 2017 class of SBA Emerging Leaders, a free entrepreneurship education course provided by the U.S. Small Business Administration. Emerging Leaders offers qualified small business owners powerful benefits, including innovative strategies to grow, acquire financing, access new markets, and leverage networking. WHO: Eligibility Requirements Be a small business owner of C-level executive (CEO, COO, etc.) Have annual revenues between $400,000 and $10 million Have been in business for at least three years Have at least one employee, other than self Make the time commitment required of the course Demonstrate the business is on the brink of growth or transition WHY: Benefits Upon completion of the seven-month course, you will have a three-year growth action plan and a network of peers and industry experts WHERE: Two Southern California Locations Will Host Classes in 2017 WHEN: Timeline Now through March – applications accepted March 20 to March 31– applicant interviews and final participants selected April through October/November – program runs HOW: Apply Online Apply online at www.interise.org/SBAEmergingLeaders MORE INFO: www.sba.gov/EmergingLeaders U.S. SBA Los Angeles District Office – Christopher.Holman@sba.gov – 818-552-3364...
IRS Not Going to Enforce ACA Individual Mandate

IRS Not Going to Enforce ACA Individual Mandate

Recently I read an article in the CPA Practice Advisor written by Isaac O’Bannon discussing the fact that the IRS is not going to enforce the ACA mandate that individuals have medical insurance coverage all 12 months of the year. Individuals will no longer be required to fill out the line 61 on tax forms which ask whether they had health insurance throughout the year, and penalizes them if they did not.  Under the healthcare law, the IRS would reject tax returns if taxpayers didn’t have insurance, unless they were exempt. If the line was left empty on their tax return, it was labeled a “silent return” and rejected. The agency now says that it will process returns regardless of the health insurance line. Congressional Republicans and many small business proponents have been pushing for years for either the repeal or replacement of the Affordable Care Act, aka Obamacare. Most notably, many who are against the healthcare program consider the individual mandate to be an affront, despite the U.S. Supreme Court upholding that provision two years ago. The most recent action by the IRS will have a major impact on the ability of the healthcare law to continue, since there will be no enforcement of Americans to have insurance. Previously, those without insurance would face a penalty of up to $695. or 2.5 percent of household income. In another Obamacare-related development, the department of Health and Human Services has implemented new rules that would make it harder for taxpayers to buy health coverage outside of official enrollment periods, lets insurance companies restrict coverage sooner if customers are late on...
2017 IRS Dirty Dozen Scams

2017 IRS Dirty Dozen Scams

Every year the IRS put publishes what it calls the Dirty Dozen. These are schemes people have used to try to get out of paying taxes. This year the list includes: Hiding Cash in offshore accounts: People put money in foreign accounts hoping it won’t be discovered, and therefore, not taxed. An individual stating the won’t pay on religious or moral grounds Micro-captive insurance tax shelters: scammers persuade owners of businesses to participate in schemes that lack many of the attributes of genuine insurance. Inaccurately reporting income to boost available tax credits. The IRS also warns about misrepresenting debt repayments for credit cards or mortgages. Overstating deductions: These can include charitable contributions, business expenses or taking credit for individuals who are not your dependents. Taking gas or research credits: The fuel use credit is generally allowed in off-highway or farming businesses. The research credit must be supported by documentation to show the investment in R&D. Tax preparers claiming they can get large refunds for clients: Some scammers lure in clients by stating they can get them large tax refunds and will take deductions or credits on returns that don’t actually apply to them. Fake charities set up by scam artists: There are often organizations set up with very similar names as true charities to scam individuals out of funds. Make sure you know to which charity you are donating, especially after a major event such as a natural disaster when fake charities pop up. Unscrupulous preparers setting up shop to falsify returns: Although most tax preparers are honest and provide excellent service, some start businesses to perpetrate refund fraud....
Individual Taxpayer Identification Number Information

Individual Taxpayer Identification Number Information

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. It is a nine-digit number that always begins with the number 9. The IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA). ITINs are issued regardless of immigration status because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code. Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception. What is an ITIN used for? ITINs are for federal tax reporting only, and are not intended to serve any other purpose. IRS issues ITINs to help individuals comply with the U.S. tax laws, and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers (SSNs). An ITIN does not: • Authorize work in the U.S. • Provide eligibility for Social Security benefits • Qualify a dependent for Earned Income Tax Credit Purposes Who needs an ITIN? IRS issues ITINs to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs. A non-resident alien individual not eligible for a SSN who is required to file a U.S. tax return only to claim a refund of tax under the provisions of a U.S. tax treaty needs an ITIN. Other examples of individuals who need ITINs include: • A nonresident alien required to...
Officer Exclusion from Workers’ Compensation Insurance

Officer Exclusion from Workers’ Compensation Insurance

Are you an officer wanting exclusion from your worker’s compensation policy? Many times owners chose to exclude themselves to save money on premiums as they usually can opt out of coverage. But a recent article sent to me by ISU – The Olson Duncan Agency gives reasons why you may choose to be covered on your policy. Benefits of Workers’ Compensation Insurance Workers’ compensation coverage pays benefits to workers injured on the job. These benefits include medical care, a portion of lost wages and permanent disability. It also provides death benefits to dependents of employees killed from a work-related accident. A typical health insurance policy specifically excludes work-related injuries unless there is a rider attached to the policy that adds business coverage. Furthermore, health insurance does not cover disability the same way that workers’ compensation insurance does. Why would someone opt out of workers’ compensation insurance? Many officers and business owners make the following assumptions when opting out of workers’ compensation insurance: They assume that their medical insurance is enough to cover them in the event of an injury incurred at the workplace. They assume that they would never want to file a workers’ compensation claim against their own company, so they don’t see the need to pay premiums for a policy that they won’t use. Drawbacks of Opting Out Even if a corporate officer spends the majority of his or her time at a desk, there is still a risk of injury. And if an injury occurs, it’s likely that the officer’s health insurance policy will have an exclusion for work-related injuries. Without workers’ compensation insurance, the cost...
IRS Offers Tips on Choosing a Tax Preparer

IRS Offers Tips on Choosing a Tax Preparer

The Internal Revenue Service is cautioning taxpayers to be on the lookout for unscrupulous return preparers, one of the most common “Dirty Dozen” tax scams seen during tax season. The vast majority of tax professionals provide honest, high-quality service. But there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. That’s why unscrupulous preparers who prey on unsuspecting taxpayers with outlandish promises of overly large refunds make the Dirty Dozen list every year. “Choose your tax return preparer carefully because you entrust them with your private financial information that needs to be protected,” said IRS Commissioner John Koskinen. “Most preparers provide high-quality service but we run across cases each year where unscrupulous preparers steal from their clients and misfile their taxes.” It is important to choose carefully when hiring an individual or firm to prepare a tax return. Well-intentioned taxpayers can be misled by preparers who don’t understand taxes or who mislead people into taking credits or deductions they aren’t entitled to in order to increase their fee. Every year, these types of tax preparers face everything from penalties to jail time for defrauding their clients. Here are a few tips when choosing a tax preparer: Ask if the preparer has an IRS Preparer Tax Identification Number (PTIN). Paid tax return preparers are required to register with the IRS, have a PTIN and include it on tax returns. Inquire whether the tax return preparer has a professional credential (enrolled agent, certified public accountant or attorney), belongs to a professional organization or attends continuing education classes....
Can You Claim Your Parents as Dependents?

Can You Claim Your Parents as Dependents?

With so many millennials moving back home with mom and dad, the question of whether or not adult children living with their parents can be claimed as dependents is a hot topic. On the other side of the generational divide, and affecting at least as many people, is the question of whether or not parents can be claimed as dependents on their children’s returns. “If you are assuming the day-to-day care and financial support of a parent and that parent qualifies as a dependent, you may be eligible to claim additional tax benefits,” said John Dundon, EA, an enrolled agent tax expert in Englewood, CO.  “In fact, your parents can live in their own home or in a retirement community and still be legally claimed as dependents – so long as they meet IRS’s requirements for a dependent.” Dundon lists the following criteria that must be met before parents can be claimed as dependents. He or she must be legally recognized as your parent, either biologically or by adoption. For 2016, all dependent relatives must have less than $4,050 in gross taxable income to qualify. He or she must receive more than 50 percent of all financial support from you. Your parent must be a U.S. citizen or a resident of Canada or Mexico. He or she must not be required to file a federal income tax return. If your parent is under 65 and filing Single, they must file a return if their income is at least $10,350; filing Single and over 65, at least $11,900; Married Filing Jointly and under 65, at least $20,700; Married Filing Jointly and...

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